BILL NUMBER: SB 2077	CHAPTERED  09/28/00

	CHAPTER   820
	FILED WITH SECRETARY OF STATE   SEPTEMBER 28, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 28, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 29, 2000
	AMENDED IN ASSEMBLY   AUGUST 28, 2000
	AMENDED IN ASSEMBLY   AUGUST 18, 2000
	AMENDED IN ASSEMBLY   JULY 6, 2000
	AMENDED IN ASSEMBLY   JUNE 15, 2000
	AMENDED IN SENATE   APRIL 13, 2000

INTRODUCED BY   Senator Ortiz

                        FEBRUARY 25, 2000

   An act to amend Sections 1770, 1771, 1771.2, 1772, 1773, 1774,
1775, 1776.6, 1777, 1777.2, 1777.4, 1779, 1779.2, 1779.4, 1779.6,
1779.8, 1779.10, 1780, 1780.2, 1780.4, 1781, 1781.2, 1781.4, 1781.6,
1781.8, 1781.10, 1782, 1783, 1783.2, 1784, 1785, 1786, 1786.2, 1787,
1788, 1788.2, 1788.4, 1789, 1789.2, 1789.4, 1789.6, 1789.8, 1793.5,
1793.6, 1793.7, 1793.8, 1793.9, 1793.11, 1793.13, 1793.15, 1793.17,
1793.19, 1793.21, 1793.23, 1793.25, 1793.27, 1793.29, 1793.50,
1793.56, 1793.58, 1793.60, and 1793.62 of, to amend and renumber
Sections 1771.9 and 1771.11 of, to add Sections 1771.3, 1772.2,
1779.7, 1783.3, 1789.1, 1792.1, 1792.3, 1792.4, 1792.5, and 1792.6
to, to add Article 6.5 (commencing with Section 1792.11) of Chapter
10 of Division 2 of, to repeal Section 1771.8 of, and to repeal and
add Sections 1771.4, 1771.5, 1771.6, 1771.7, 1792, and 1792.2 of, the
Health and Safety Code, relating to continuing care contracts, and
making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 2077, Ortiz.  Continuing care contracts:  retirement
communities:  elderly.
   Existing law contains provisions relating to supervision of life
care contracts, also known as continuing care contracts, including
requirements governing continuing care communities and contracts.
   This bill would revise and recast these provisions, including
changes to the definitions used in these provisions, rights of
continuing care community residents, requirements for the obtaining
of a certificate of authority for a continuing care community, and
continuing care contract requirements.
   Existing law creates the Continuing Care Provider Fee Fund, which
is continuously appropriated to the State Department of Social
Services for purposes of administering continuing care retirement
community provisions.  The fund consists of fees paid to the
department pursuant to these provisions.
   This bill would make various changes in provisions relating to the
establishment of fees, including requirements pertaining to the
establishment of fees for changes in continuing care provider
organizations, thus increasing payments to the fund and thereby
constituting an appropriation.
   This bill would also establish liquid reserve requirements that
providers shall be required to meet, and would authorize the
department to increase liquid reserve requirements in certain
circumstances.  The bill would establish refund reserve requirements
for certain providers.
   This bill would, until January 1, 2005, establish requirements for
the department to implement a trial program, and report to the
Legislature, on assessing long-term care provider solvency.  The
trial program would require each provider to obtain an actuarial
study and file it with the department, except under specified
circumstances.
   Existing continuing care provisions specify that any entity that
sells deposit subscriptions that either proposes to promise to
provide care without having a current and valid permit to sell these
subscriptions or fails to place any consideration into an escrow
account is guilty of a misdemeanor.
   This bill would provide that these misdemeanors relate to any
entity that accepts deposits, rather than any entity that sells
deposit subscriptions.
   Because the bill would change the definition of a crime, it would
constitute a state-mandated local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1770 of the Health and Safety Code is amended
to read:
   1770.  The Legislature finds, declares, and intends all of the
following:
   (a) Continuing care retirement communities are an alternative for
the long-term residential, social, and health care needs of
California's elderly residents and seek to provide a continuum of
care, minimize transfer trauma, and allow services to be provided in
an appropriately licensed setting.
   (b) Because elderly residents often both expend a significant
portion of their savings in order to purchase care in a continuing
care retirement community and expect to receive care at their
continuing care retirement community for the rest of their lives,
tragic consequences can result if a continuing care provider becomes
insolvent or unable to provide responsible care.
   (c) There is a need for disclosure concerning the terms of
agreements made between prospective residents and the continuing care
provider, and concerning the operations of the continuing care
retirement community.
   (d) Providers of continuing care should be required to obtain a
certificate of authority to enter into continuing care contracts and
should be monitored and regulated by the State Department of Social
Services.
   (e) This chapter applies equally to for-profit and nonprofit
provider entities.
   (f) This chapter states the minimum requirements to be imposed
upon any entity offering or providing continuing care.
   (g) Because the authority to enter into continuing care contracts
granted by the State Department of Social Services is neither a
guarantee of performance by the providers nor an endorsement of any
continuing care contract provisions, prospective residents must
carefully consider the risks, benefits, and costs before signing a
continuing care contract and should be encouraged to seek financial
and legal advice before doing so.
  SEC. 2.  Section 1771 of the Health and Safety Code is amended to
read:
   1771.  Unless the context otherwise requires, the definitions in
this section govern the interpretation of this chapter.
   (a) (1) "Affiliate" means any person, corporation, limited
liability company, business trust, trust, partnership, unincorporated
association, or other legal entity that directly or indirectly
controls, is controlled by, or is under common control with, a
provider or applicant.
   (2) "Affinity group" means a grouping of entities sharing a common
interest, philosophy, or connection (e.g., military officers,
religion).
   (3) "Annual report" means the report  each provider is required to
file annually with the department, as described in Section 1790.
   (4) "Applicant" means any entity, or combination of entities, that
submits and has pending an application to the department for a
permit to accept deposits and a certificate of authority.
   (5) "Assisted living services" includes, but is not limited to,
assistance with personal activities of daily living, including
dressing, feeding, toileting, bathing, grooming, mobility, and
associated tasks, to help provide for and maintain physical and
psychosocial comfort.
   (6) "Assisted living unit" means the living area or unit within a
continuing care retirement community that is specifically designed to
provide ongoing assisted living services.
   (7) "Audited financial statement" means financial statements
prepared in accordance with generally accepted accounting principles
including the opinion of an independent certified public accountant,
and notes to the financial statements considered customary or
necessary to provide full disclosure and complete information
regarding the provider's financial statements, financial condition,
and operation.
   (b) (reserved)
   (c) (1) "Cancel" means to destroy the force and effect of an
agreement or continuing care contract.
   (2) "Cancellation period" means the 90-day period, beginning when
the resident physically moves into the continuing care retirement
community, during which the resident may cancel the continuing care
contract, as provided in Section 1788.2.
   (3) "Care" means nursing, medical, or other health related
services, protection or supervision, assistance with the personal
activities of daily living, or any combination of those services.
   (4) "Cash equivalent" means certificates of deposit and United
States treasury securities with a maturity of five years or less.
   (5) "Certificate" or "certificate of authority" means the
certificate issued by the department, properly executed and bearing
the State Seal, authorizing a specified provider to enter into one or
more continuing care contracts at a single specified continuing care
retirement community.
   (6) "Condition" means a restriction, specific action, or other
requirement imposed by the department for the initial or continuing
validity of a permit to accept deposits, a provisional certificate of
authority, or a certificate of authority.  A condition may limit the
circumstances under which the provider may enter into any new
deposit agreement or contract, or may be imposed as a condition
precedent to the issuance of a permit to accept deposits, a
provisional certificate of authority, or a certificate of authority.

   (7) "Consideration" means some right, interest, profit, or benefit
paid, transferred, promised, or provided by one party to another as
an inducement to contract.  Consideration includes some forbearance,
detriment, loss, or responsibility, that is given, suffered, or
undertaken by a party as an inducement to another party to contract.

   (8) "Continuing care contract" means a contract that includes a
continuing care promise made, in exchange for an entrance fee, the
payment of periodic charges, or both types of payments.  A continuing
care contract may consist of one agreement or a series of agreements
and other writings incorporated by reference.
   (9) "Continuing care advisory committee" means an advisory panel
appointed pursuant to Section 1777.
   (10) "Continuing care promise" means a promise, expressed or
implied, by a provider to provide one or more elements of care to an
elderly resident for the duration of his or her life or for a term in
excess of one year.  Any such promise or representation, whether
part of a continuing care contract, other agreement, or series of
agreements, or contained in any advertisement, brochure, or other
material, either written or oral, is a continuing care promise.
   (11) "Continuing care retirement community" means a facility
located within the State of California where services promised in a
continuing care contract are provided.  A distinct phase of
development approved by the department may be considered to be the
continuing care retirement community when a project is being
developed in successive distinct phases over a period of time.  When
the services are provided in residents' own homes, the homes into
which the provider takes those services are considered part of the
continuing care retirement community.
   (12) "Control" means directing or causing the direction of the
financial management or the policies of another entity, including an
operator of a continuing care retirement community, whether by means
of the controlling entity's ownership interest, contract, or any
other involvement.  A parent entity or sole member of an entity
controls a subsidiary entity provider for a continuing care
retirement community if its officers, directors, or agents directly
participate in the management of the subsidiary entity or in the
initiation or approval of policies that affect the continuing care
retirement community's operations, including, but not limited to,
approving budgets or the administrator for a continuing care
retirement community.
   (d) (1) "Department" means the State Department of Social
Services.
   (2) "Deposit" means any transfer of consideration, including a
promise to transfer money or property, made by a depositor to any
entity that promises or proposes to promise to provide continuing
care, but is not authorized to enter into a continuing care contract
with the potential depositor.
   (3) "Deposit agreement" means any agreement made between any
entity accepting a deposit and a depositor.  Deposit agreements for
deposits received by an applicant prior to the department's release
of funds from the deposit escrow account shall be subject to the
requirements described in Section 1780.4.
   (4) "Depository" means a bank or institution that is a member of
the Federal Deposit Insurance Corporation or a comparable deposit
insurance program.
   (5) "Depositor" means any prospective resident who pays a deposit.
  Where any portion of the consideration transferred to an applicant
as a deposit or to a provider as consideration for a continuing care
contract is transferred by a person other than the prospective
resident or a resident, that third-party transferor shall have the
same cancellation or refund rights as the prospective resident or
resident for whose benefit the consideration was transferred.
   (6) "Director" means the Director of Social Services.
   (e) (1) "Elderly" means an individual who is 60 years of age or
older.
   (2) "Entity" means an individual, partnership, corporation,
limited liability company, and any other form for doing business.
Entity includes a person, sole proprietorship, estate, trust,
association, and joint venture.
   (3) "Entrance fee" means the sum of any initial, amortized, or
deferred transfer of consideration made or promised to be made by, or
on behalf of, a person entering into a continuing care contract for
the purpose of assuring care or related services pursuant to that
continuing care contract or as full or partial payment for the
promise to provide care for the term of the continuing care contract.
  Entrance fee includes the purchase price of a condominium,
cooperative, or other interest sold in connection with a promise of
continuing care. An initial, amortized, or deferred transfer of
consideration that is greater in value than 12 times the monthly care
fee shall be presumed to be an entrance fee.
   (4) "Equity" means the value of real property in excess of the
aggregate amount of all liabilities secured by the property.
   (5) "Equity interest" means an interest held by a resident in a
continuing care retirement community that consists of either an
ownership interest in any part of the continuing care retirement
community property or a transferable membership that entitles the
holder to reside at the continuing care retirement community.
   (6) "Equity project" means a continuing care retirement community
where residents receive an equity interest in the continuing care
retirement community property.
   (7) "Equity securities" shall refer generally to large and
midcapitalization corporate stocks that are publicly traded and
readily liquidated for cash, and shall include shares in mutual funds
that hold portfolios consisting predominantly of these stocks and
other qualifying assets, as defined by Section 1792.2.  Equity
securities shall also include other similar securities that are
specifically approved by the department.
   (8) "Escrow agent" means a bank or institution, including, but not
limited to, a title insurance company, approved by the department to
hold and render accountings for deposits of cash or cash
equivalents.
   (f) "Facility" means any place or accommodation where a provider
provides or will provide a resident with care or related services,
whether or not the place or accommodation is constructed, owned,
leased, rented, or otherwise contracted for by the provider.
   (g) (reserved)
   (h) (reserved)
   (i) (1) "Inactive certificate of authority" means a certificate
that has been terminated under Section 1793.8.
   (2) "Investment securities" means any of the following:
   (A) Direct obligations of the United States, including obligations
issued or held in book-entry form on the books of the United States
Department of the Treasury or obligations the timely payment of the
principal of, and the interest on, which are fully guaranteed by the
United States.
   (B) Obligations, debentures, notes, or other  evidences of
indebtedness issued or guaranteed by any of the following:
   (i) The Federal Home Loan Bank System.
   (ii) The Export-Import Bank of the United States.
   (iii) The Federal Financing Bank.
   (iv) The Government National Mortgage Association.
   (v) The Farmer's Home Administration.
   (vi) The Federal Home Loan Mortgage Corporation of the Federal
Housing Administration.
   (vii) Any agency, department, or other instrumentality of the
United States if the obligations are rated in one of the two highest
rating categories of each rating agency rating those obligations.
   (C) Bonds of the State of California or of any county, city and
county, or city in this state, if rated in one of the two highest
rating categories of each rating agency rating those bonds.
   (D) Commercial paper of finance companies and banking institutions
rated in one of the two highest categories of each rating agency
rating those instruments.
   (E) Repurchase agreements fully secured by collateral security
described in subparagraph (A) or (B), as evidenced by an opinion of
counsel, if the collateral is held by the provider or a third party
during the term of the repurchase agreement, pursuant to the terms of
the agreement, subject to liens or claims of third parties, and has
a market value, which is determined at least every 14 days, at least
equal to the amount so invested.
   (F) Long-term investment agreements, which have maturity dates in
excess of one year, with financial institutions, including, but not
limited to, banks and insurance companies or their affiliates, if the
financial institution's paying ability for debt obligations or
long-term claims or the paying ability of a related guarantor of the
financial institution for these obligations or claims, is rated in
one of the two highest rating categories of each rating agency rating
those instruments, or if the short-term investment agreements are
with the financial institution or the related guarantor of the
financial institution, the long-term or short-term debt obligations,
whichever is applicable, of which are rated in one of the two highest
long-term or short-term rating categories, of each rating agency
rating the bonds of the financial institution or the related
guarantor, provided that if the rating falls below the two highest
rating categories, the investment agreement shall allow the provider
the option to replace the financial institution or the related
guarantor of the financial institution or shall provide for the
investment securities to be fully collateralized by investments
described in subparagraph (A), and, provided further, if so
collateralized, that the provider has a perfected first security lien
on the collateral, as evidenced by an opinion of counsel and the
collateral is held by the provider.
   (G) Banker's acceptances or certificates of deposit of, or time
deposits in, any savings and loan association that meets any of the
following criteria:
   (i) The debt obligations of the savings and loan association, or
in the case of a principal bank, of the bank holding company, are
rated in one of the two highest rating categories of each rating
agency rating those instruments.
   (ii) The certificates of deposit or time deposits are fully
insured by the Federal Deposit Insurance Corporation.
   (iii) The certificates of deposit or time deposits are secured at
all times, in the manner and to the extent provided by law, by
collateral security described in subparagraph (A) or (B) with a
market value, valued at least quarterly, of no less than the original
amount of moneys so invested.
   (H) Taxable money market government portfolios restricted to
obligations issued or guaranteed as to payment of principal and
interest by the full faith and credit of the United States.
   (I) Obligations the interest on which is excluded from gross
income for federal income tax purposes and money market mutual funds
whose portfolios are restricted to these obligations, if the
obligations or mutual funds are rated in one of the two highest
rating categories by each rating agency rating those obligations.
   (J) Bonds that are not issued by the United States or any federal
agency, but that are listed on a national exchange and that are rated
at least "A" by Moody's Investors Service, or the equivalent rating
by Standard and Poor's Corporation or Fitch Investors Service.
   (K) Bonds not listed on a national exchange that are traded on an
over-the-counter basis, and that are rated at least "Aa" by Moody's
Investors Service or "AA" by Standard and Poor's Corporation or Fitch
Investors Service.
   (j) (reserved)
   (k) (reserved)
   (l) "Life care contract" means a continuing care contract that
includes a promise, expressed or implied, by a provider to provide or
pay for routine services at all levels of care, including acute care
and the services of physicians and surgeons, to the extent not
covered by other public or private insurance benefits, to a resident
for the duration of his or her life.  Care shall be provided under a
life care contract in a continuing care retirement community having a
comprehensive continuum of care, including a skilled nursing
facility, under the ownership and supervision of the provider on or
adjacent to the premises.  No change may be made in the monthly fee
based on level of care.  A life care contract shall also include
provisions to subsidize residents who become financially unable to
pay their monthly care fees.
   (m) (1) "Monthly care fee" means the fee charged to a resident in
a continuing care contract on a monthly or other periodic basis for
current accommodations and services including care, board, or
lodging.  Periodic entrance fee payments or other prepayments shall
not be monthly care fees.
   (2) "Monthly fee contract" means a continuing care contract that
requires residents to pay monthly care fees.
   (n) "Nonambulatory person" means a person who is unable to leave a
building unassisted under emergency conditions in the manner
described by Section 13131.
   (o) (reserved)
   (p) (1) "Per capita cost" means a continuing care retirement
community's operating expenses, excluding depreciation, divided by
the average number of residents.
   (2) "Periodic charges" means fees paid by a resident on a periodic
basis.
   (3) "Permit to accept deposits" means a written authorization by
the department permitting an applicant to enter into deposit
agreements regarding a single specified continuing care retirement
community.
   (4) "Prepaid contract" means a continuing care contract in which
the monthly care fee, if any, may not be adjusted to cover the actual
cost of care and services.
   (5) "Preferred access" means that residents who have previously
occupied a residential living unit have a right over other persons to
any assisted living or skilled nursing beds that are available at
the community.
   (6) "Processing fee" means a payment to cover administrative costs
of processing the application of a depositor or prospective
resident.
   (7) "Promise to provide one or more elements of care" means any
expressed or implied representation that one or more elements of care
will be provided or will be available, such as by preferred access.

   (8) "Proposes" means a representation that an applicant or
provider will or intends to make a future promise to provide care,
including a promise that is subject to a condition, such as the
construction of a continuing care retirement community or the
acquisition of a certificate of authority.
   (9) "Provider" means an entity that provides continuing care,
makes a continuing care promise, or proposes to promise to provide
continuing care.  "Provider" also includes any entity that controls
an entity that provides continuing care, makes a continuing care
promise, or proposes to promise to provide continuing care.  The
department shall determine whether an entity controls another entity
for purposes of this article.  No homeowner's association,
cooperative, or condominium association may be a provider.
   (10) "Provisional certificate of authority" means the certificate
issued by the department, properly executed and bearing the State
Seal, under Section 1786.  A provisional certificate of authority
shall be limited to the specific continuing care retirement community
and number of units identified in the applicant's application.
   (q) (reserved)
   (r) (1) "Refund reserve" means the reserve a provider is required
to maintain, as provided in Section 1792.6.
   (2) "Refundable contract" means a continuing care contract that
includes a promise, expressed or implied, by the provider to pay an
entrance fee refund or to repurchase the transferor's unit,
membership, stock, or other interest in the continuing care
retirement community when the promise to refund some or all of the
initial entrance fee extends beyond the resident's sixth year of
residency.  Providers that enter into refundable contracts shall be
subject to the refund reserve requirements of Section 1792.6.  A
continuing care contract that includes a promise to repay all or a
portion of an entrance fee that is conditioned upon reoccupancy or
resale of the unit previously occupied by the resident shall not be
considered a refundable contract for purposes of the refund reserve
requirements of Section 1792.6, provided that this conditional
promise of repayment is not referred to by the applicant or provider
as a "refund."
   (3) "Resale fee" means a levy by the provider against the proceeds
from the sale of a transferor's equity interest.
   (4) "Reservation fee" refers to consideration collected by an
entity that has made a continuing care promise or is proposing to
make this promise and has complied with Section 1771.4.
   (5) "Resident" means a person who enters into a continuing care
contract with a provider, or who is designated in a continuing care
contract to be a person being provided or to be provided services,
including care, board, or lodging.
   (6) "Residential care facility for the elderly" means a housing
arrangement as defined by Section 1569.2.
   (7) "Residential living unit" means a living unit in a continuing
care retirement community that is not used exclusively for assisted
living services or nursing services.
   (s) (reserved)
   (t) (1) "Termination" means the ending of a continuing care
contract as provided for in the terms of the continuing care
contract.
   (2) "Transfer trauma" means death, depression, or regressive
behavior, that is caused by the abrupt and involuntary transfer of an
elderly resident from one home to another and results from a loss of
familiar physical environment, loss of well-known neighbors,
attendants, nurses and medical personnel, the stress of an abrupt
break in the small routines of daily life, or the loss of visits from
friends and relatives who may be unable to reach the new facility.
   (3) "Transferor" means a person who transfers, or promises to
transfer, consideration in exchange for care and related services
under a continuing care contract or proposed continuing care
contract, for the benefit of another.  A transferor shall have the
same rights to cancel and obtain a refund as the depositor under the
deposit agreement or the resident under a continuing care contract.

  SEC. 3.  Section 1771.2 of the Health and Safety Code is amended to
read:
   1771.2.  (a) An entity shall apply for and hold a currently valid
permit to accept deposits before it may enter into a deposit
agreement or accept a deposit.
   (b) A provider shall hold a currently valid provisional
certificate of authority or certificate of authority before it may
enter into a continuing care contract.
   (c) Before a provider subcontracts or assigns to another entity
the responsibility to provide continuing care, that other entity
shall have a current and valid certificate of authority.  A provider
holding a certificate of authority may contract for the provision of
a particular aspect of continuing care, such as medical care, with
another entity that does not possess a certificate of authority, if
that other entity is appropriately licensed under laws of this state
to provide that care, and the provider has not paid in advance for
more than one year for that care.
   (d) If an entity enters into an agreement to provide care for life
or for more than one year to a person under 60 years of age in
return for consideration, and the agreement includes the provision of
services to that person after age 60, when the person turns 60 years
of age, the promising entity shall comply with all the requirements
imposed by this chapter.
  SEC. 4.  Section 1771.3 is added to the Health and Safety Code, to
read:
   1771.3.  (a) This chapter shall not apply to either of the
following:
   (1) An arrangement for the care of a person by a relative.
   (2) An arrangement for the care of a person or persons from only
one family by a friend.
   (b) This chapter shall not apply to any admission or residence
agreements offered by residential communities for the elderly or
residential care facilities for the elderly that promise residents
preferred access to assisted living services or nursing care, when
each of the following conditions is satisfied:
   (1) Residents pay on a fee-for-service basis for available
assisted living services and nursing care.
   (2) The fees paid for available assisted living services and
nursing care are the same for residents who have previously occupied
a residential living unit as for residents who have not previously
occupied a residential living unit.
   (3) No entrance fee or prepayment for future care or access, other
than monthly care fees, is paid by, or charged to, any resident at
the community or facility.  For purposes of this paragraph, the term
entrance fee shall not include initial, deferred, or amortized
payments that cumulatively do not exceed seven thousand five hundred
dollars ($7,500).
   (4) The provider has not made a continuing care promise of
preferred access, other than a promise as described in paragraph (5).

   (5) The admission or residence agreement states:
   (A) "This agreement does not guarantee that an assisted living or
nursing bed will be available for residents, but, instead, promises
preferred access to any assisted living or nursing beds that are
available at the community or facility.  The promise of preferred
access gives residents who have previously occupied a residential
living unit a right over other persons to such beds."
                   (B) "A continuing care contract promises that care
will be provided to residents for life or for a term in excess of a
year.  (Name of community or facility) is not a continuing care
retirement community and (name of provider) does not hold a
certificate of authority to enter into continuing care contracts and
is not required to have the same fiscal reserves as a continuing care
provider.  This agreement is not a continuing care contract and is
exempted from the continuing care statutes under subdivision (b) of
Section 1771.3 of the Health and Safety Code so long as the
conditions set forth in that section are met."
   (6) The admission or residence agreement also states the policies
and procedures regarding transfers to higher levels of care within
the community or facility.
   (c) Any entity may apply to the department for a Letter of
Exemption stating that the requesting entity satisfies the
requirements for an exemption under this section.
   (d) The department shall issue a Letter of Exemption to a
requesting entity if the department determines either of the
following:
   (1) The requesting entity satisfies each of the requirements for
an exemption under subdivision (b).
   (2) The requesting entity satisfies each of the requirements for
an exemption under subdivision (b) other than the requirements of
paragraph (2) of subdivision (b), and there is no substantial
difference between the following:
   (A) The fees for available assisted living services and skilled
nursing care paid by residents who have previously occupied a
residential living unit.
   (B) The fees for available assisted living services and skilled
nursing care paid by residents who have not previously occupied a
residential living unit.
   (e) An application to the department for a Letter of Exemption
shall include all of the following:
   (1) A nonrefundable one thousand dollar ($1,000) application fee.

   (2) The name and business address of the applicant.
   (3) A description of the services and care available or provided
to residents of the community or facility.
   (4) Documentation establishing that the requesting entity
satisfies the requirements for an exemption under this section,
including all of the following:
   (A) A schedule showing all fees for assisted living services and
skilled nursing care charged to residents at the facility or
community who have previously occupied a residential living unit.
   (B) A schedule showing all fees for assisted living services and
skilled nursing care charged to residents at the facility or
community who have not previously occupied a residential living unit.

   (C) A description of the differences between the fees for assisted
living services and skilled nursing care charged to residents who
have not previously occupied a residential unit and the fees for
assisted living services and skilled nursing care charged to
residents who have previously occupied a residential unit.
   (D) A schedule showing any other fees charged to residents of the
community or facility.
   (E) Copies of all admission and residence agreement forms that
have been entered into, or will be entered into, with residents at
the community or facility.
   (5) Any other information reasonably requested by the department.

   (f) If at any time any of the conditions stated in this section
are not satisfied, then the requirements of this chapter apply, and
the department may impose appropriate remedies and penalties set
forth in Article 7 (commencing with Section 1793.5).
  SEC. 5.  Section 1771.4 of the Health and Safety Code is repealed.

  SEC. 6.  Section 1771.4 is added to the Health and Safety Code, to
read:
   1771.4.  An entity may conduct a market test for a proposed
continuing care retirement community and collect reservation fees
from persons interested in residing at the proposed continuing care
retirement community without violating this chapter if all of the
following conditions are met:
   (a) The entity has filed with the department an application for a
permit to accept deposits and a certificate of authority for the
project.
   (b) The entity's application includes the proposed reservation
agreement form and a proposed escrow agreement that provide all of
the following:
   (1) All fees shall be deposited in escrow.
   (2) Refunds shall be made within 10 calendar days after the payer'
s or proposed resident's request or 10 days after denial of the
application for a permit to accept deposits.
   (3) All reservation fees shall be converted to deposits within 15
days after a permit to accept deposits is issued.
   (c) The department has acknowledged in writing its receipt of the
entity's application and its approval of the entity's proposed
reservation agreement between the payer and the entity and the escrow
agreement between the escrow holder and the entity.
   (d) The amount of any reservation fee collected by the entity does
not exceed one thousand dollars ($1,000) or 1 percent of the average
entrance fee amount as determined from the entity's application,
whichever is greater.
   (e) The entity places all reservation fees collected by the entity
into an escrow under the terms of the approved reservation agreement
and escrow agreement.
  SEC. 7.  Section 1771.5 of the Health and Safety Code is repealed.

  SEC. 8.  Section 1771.5 is added to the Health and Safety Code, to
read:
   1771.5.  The department shall not issue a provisional certificate
of authority or a certificate of authority to an applicant until the
applicant has obtained licenses for the entire continuing care
retirement community, including a license to operate the residential
living and assisted living units, pursuant to Chapter 3.2 (commencing
with Section 1569) and if a skilled nursing facility is on the
premises, a license for the facility pursuant to Chapter 2
(commencing with Section 1250).
  SEC. 9.  Section 1771.6 of the Health and Safety Code is repealed.

  SEC. 10.  Section 1771.6 is added to the Health and Safety Code, to
read:
   1771.6.  (a) Any entity may apply to the department for a Letter
of Nonapplicability for reasons other than those specified in Section
1771.3, which states that the provisions of this chapter do not
apply to its community, project, or proposed project.
   (b) Applications for Letters of Nonapplicability shall be made to
the department in writing and include the following:
   (1) A nonrefundable one thousand dollar ($1,000) application fee.

   (2) A list of the reasons why the existing or proposed project may
not be subject to this chapter.
   (3) A copy of the existing or proposed contract between the entity
and residents.
   (4) Copies of all advertising material.
   (5) Any other information reasonably requested by the department.

   (c) The department shall do both of the following:
   (1) Within seven calendar days, acknowledge receipt of the request
for a Letter of Nonapplicability.
   (2) Within 30 calendar days after all materials are received,
either issue the Letter of Nonapplicability or notify the entity of
the department's reasons for denial of the request.
   (d) (1) If the department determines that the entity does not
qualify for a Letter of Nonapplicability, the entity shall refrain
from, or immediately cease, entering into continuing care contracts.

   (2) If an entity to which this subdivision applies intends to
provide continuing care, an application for a certificate of
authority shall be required to be filed with the department pursuant
to this chapter.
   (3) If an entity to which this subdivision applies does not intend
to provide continuing care, it shall alter its plan of operation so
that the project is not subject to this chapter.  To obtain a Letter
of Nonapplicability for the revised project, the entity shall submit
a new application and fee.
  SEC. 11.  Section 1771.7 of the Health and Safety Code is repealed.

  SEC. 12.  Section 1771.7 is added to the Health and Safety Code, to
read:
   1771.7.  (a) No resident of any continuing care retirement
community shall be deprived of any civil or legal right, benefit, or
privilege guaranteed by law, by the California Constitution, or by
the United States Constitution solely by reason of status as a
resident of a community.  In addition, because of the discretely
different character of residential living unit programs that are a
part of continuing care retirement communities, this section shall
augment Chapter 3.9 (commencing with Section 1599), Section 73523 of
Title 22 of the California Code of Regulations, and applicable
federal law and regulations.
   (b) All residents in residential living units shall have all of
the following rights:
   (1) To live in an attractive, safe, and well maintained physical
environment.
   (2) To live in an environment that enhances personal dignity,
maintains independence, and encourages self-determination.
   (3) To participate in activities that meet individual physical,
intellectual, social, and spiritual needs.
   (4) To expect effective channels of communication between
residents and staff, and between residents and the administration or
provider's governing body.
   (5) To receive a clear and complete written contract that
establishes the mutual rights and obligations of the resident and the
continuing care retirement community.
   (6) To maintain and establish ties to the local community.
   (c) A continuing care retirement community shall maintain an
environment that enhances the residents' self-determination and
independence.  The provider shall do both of the following:
   (1) Permit the formation of a resident association by interested
residents who may elect a governing body.  The provider shall provide
space and post notices for meetings, and provide assistance in
attending meetings for those residents who request it.  In order to
permit a free exchange of ideas, at least part of each meeting shall
be conducted without the presence of any continuing care retirement
community personnel.  The association may, among other things, make
recommendations to management regarding resident issues that impact
the residents' quality of life.  Meetings shall be open to all
residents to attend as well as to present issues.  Executive sessions
of the governing body shall be attended only by the governing body.

   (2) Establish policies and procedures that promote the sharing of
information, dialogue between residents and management, and access to
the provider's governing body.  The policies and procedures shall be
evaluated at a minimum of every two years by the continuing care
retirement community administration to determine their effectiveness
in maintaining meaningful resident-management relations.
   (d) In addition to any statutory or regulatory bill of rights
required to be provided to residents of residential care facilities
for the elderly or skilled nursing facilities, the provider shall
provide a copy of the bill of rights prescribed by this section to
each resident at or before the resident's admission to the community.

   (e) The department may, upon receiving a complaint of a violation
of this section, request a copy of the policies and procedures along
with documentation on the conduct and findings of any
self-evaluations and consult with the Continuing Care Advisory
Committee for determination of compliance.
   (f) Failure to comply with this section shall be grounds for
suspension, condition, or revocation of the provisional certificate
of authority or certificate of authority pursuant to Section 1793.21.

  SEC. 13.  Section 1771.8 of the Health and Safety Code is repealed.

  SEC. 14.  Section 1771.9 of the Health and Safety Code is amended
and renumbered to read:
   1771.8.  (a) The Legislature finds and declares all of the
following:
   (1) The residents of continuing care retirement communities have a
unique and valuable perspective on the operations of and services
provided in the community in which they live.
   (2) Resident input into decisions made by the provider is an
important factor in creating an environment of cooperation, reducing
conflict, and ensuring timely response and resolution to issues that
may arise.
   (3) Continuing care retirement communities are strengthened when
residents know that their views are heard and respected.
   (b) The Legislature encourages continuing care retirement
communities to exceed the minimum resident participation requirements
established by this section by, among other things, the following:
   (1) Encouraging residents to form a resident association, and
assisting the residents, the resident association, and its governing
body to keep informed about the operation of the continuing care
retirement community.
   (2) Encouraging residents of a continuing care retirement
community or their elected representatives to select residents to
participate as board members of the governing body of the provider.
   (3) Quickly and fairly resolving any dispute, claim, or grievance
arising between a resident and the continuing care retirement
community.
   (c) The governing body of a provider, or the designated
representative of the provider, shall hold, at a minimum, semiannual
meetings with the residents of the continuing care retirement
community, or the resident association or its governing body, for the
purpose of the free discussion of subjects including, but not
limited to, income, expenditures, and financial trends and issues as
they apply to the continuing care retirement community and proposed
changes in policies, programs, and services.  Nothing in this section
precludes a provider from taking action or making a decision at any
time, without regard to the meetings required under this subdivision.

   (d) At least 30 days prior to the implementation of any increase
in the monthly care fee, the designated representative of the
provider shall convene a meeting, to which all residents shall be
invited, for the purpose of discussing the reasons for the increase,
the basis for determining the amount of the increase, and the data
used for calculating the increase.  This meeting may coincide with
the semiannual meetings provided for in subdivision (c).
   (e) The governing body of a provider, or the designated
representative of the provider shall provide residents with at least
14 days' advance notice of each meeting provided for in subdivisions
(c) and (d).  The governing body of a provider, or the designated
representative of the provider shall post the notice of, and the
agenda for, the meeting in a conspicuous place in the continuing care
retirement community at least 14 days prior to the meeting.  The
governing body of a provider, or the designated representative of the
provider shall make available to residents of the continuing care
retirement community upon request the agenda and accompanying
materials at least seven days prior to the meeting.
   (f) Each provider shall make available to the resident association
or its governing body, or if neither exists, to a committee of
residents, a financial statement of activities comparing actual costs
to budgeted costs broken down by expense category, not less than
semiannually, and shall consult with the resident association or its
governing body, or if neither exists to a committee of residents,
during the annual budget planning process.
   (g) Each provider shall, within 10 days after the annual report
required pursuant to Section 1790 is submitted to the department,
provide, at a central and conspicuous location in the community, a
copy of the annual report, including a copy of the annual audited
financial statement, but excluding personal confidential information.

   (h) Each provider shall maintain, as public information, available
upon request to residents, prospective residents, and the public,
minutes of the board of director's meetings and shall retain these
records for at least three years from the date the records were filed
or issued.
   (i) The governing body of a provider that is not part of a
multifacility organization with more than one continuing care
retirement community in the state shall accept at least one resident
of the continuing care retirement community it operates to
participate as a nonvoting resident representative to the provider's
governing body.
   (j) In a multifacility organization having more than one
continuing care retirement community in the state, the governing body
of the multifacility organization shall elect either to have at
least one nonvoting resident representative to the provider's
governing body for each California-based continuing care retirement
community the provider operates or to have a resident-elected
committee composed of representatives of the residents of each
California-based continuing care retirement community that the
provider operates select or nominate at least one nonvoting resident
representative to the provider's governing body for every three
California-based continuing care retirement communities or fraction
thereof that the provider operates.
   (k) In order to encourage innovative and alternative models of
resident involvement, a resident selected pursuant to subdivision (i)
to participate as a resident representative to the provider's
governing body may, at the option of the resident association, be
selected in any one of the following ways:
   (1) By a majority vote of the resident association of a provider
or by a majority vote of a resident-elected committee of residents of
a multifacility organization.
   (2) If no resident association exists, any resident may organize a
meeting of the majority of the residents of the continuing care
retirement community to select or nominate residents to represent
them before the governing body.
   (3) Any other method designated by the resident association.
   (l) The resident association, or organizing resident, or in the
case of a multifacility organization, the resident-elected committee
of residents, shall give residents of the continuing care retirement
community at least 30 days' advance notice of the meeting to select a
resident representative and shall post the notice in a conspicuous
place at the continuing care retirement community.
   (m) Except as provided in subdivision (n), the resident
representative shall receive the same notice of board meetings, board
packets, minutes, and other materials as members and shall be
permitted to attend, speak, and participate in all meetings of the
board.
   (n) Notwithstanding subdivision (m), the governing body may
exclude resident representatives from its executive sessions and from
receiving board materials to be discussed during executive session.
However, resident representatives shall be included in executive
sessions and shall receive all board materials to be discussed during
executive sessions related to discussions of the annual budgets,
increases in monthly care fees, indebtedness, and expansion of new
and existing continuing care retirement communities.
   (o) The provider shall pay all reasonable travel costs for the
resident representative.
   (p) The provider shall disclose in writing the extent of resident
involvement with the board to prospective residents.
   (q) Nothing in this section prohibits a provider from exceeding
the minimum resident participation requirements of this section by,
for example, having more resident meetings or more resident
representatives to the board than required or by having one or more
residents on the provider's governing body who are selected with the
active involvement of residents.
   (r) On or before January 1, 2001, the Continuing Care Advisory
Committee of the department established pursuant to Section 1777
shall evaluate and report to the Legislature on the implementation of
this section.
  SEC. 15.  Section 1771.11 of the Health and Safety Code is amended
and renumbered to read:
   1771.10.  Each provider shall adopt a comprehensive disaster
preparedness plan specifying policies for evacuation, relocation,
continued services, reconstruction, organizational structure,
insurance coverage, resident education, and plant replacement.
  SEC. 16.  Section 1772 of the Health and Safety Code is amended to
read:
   1772.  (a) No report, circular, public announcement, certificate,
financial statement, or any other printed matter or advertising
material, or oral representation, that states or implies that an
entity sponsors, guarantees, or assures the performance of any
continuing care contract, shall be published or presented to any
prospective resident unless both of the following have been met:
   (1) Paragraph (5) of subdivision (a) of Section 1788 applies and
the requirements of that paragraph have been satisfied.
   (2) The entity files with the department a duly authorized and
executed written declaration that it accepts full financial
responsibility for each continuing care contract.  The filing entity
shall be subject to the application requirements set forth in Article
2 (commencing with Section 1779), shall be a coobligor for the
subject contracts, and shall be a coprovider on the applicable
provisional certificate of authority and certificate of authority.
   (b) Implied sponsorship includes the use of the entity's name for
the purpose of implying that the entity's reputation may be relied
upon to ensure the performance of the continuing care contract.
   (c) Any implication that the entity may be financially responsible
for these contracts may be rebutted by a conspicuous statement, in
all continuing care contracts and marketing materials, that clearly
discloses to prospective residents and all transferors that the
entity is not financially responsible.
   (d) On written appeal to the department, and for good cause shown,
the department may, in its discretion, allow an affinity group
exemption from this section.  If an exemption is granted, every
continuing care contract shall include a conspicuous statement which
clearly discloses to prospective residents and all transferors that
the affinity group entity is not financially responsible.
   (e) If the name of an entity, including, but not limited to, a
religion, is used in connection with the development, marketing, or
continued operation of a continuing care retirement community, but
that entity does not actually own, control, manage, or otherwise
operate the continuing care retirement community, the provider shall
clearly disclose the absence of that affiliation, involvement, or
association with the continuing care retirement community in the
continuing care contract.
  SEC. 17.  Section 1772.2 is added to the Health and Safety Code, to
read:
   1772.2.  (a) All printed advertising materials, including
brochures, circulars, public announcements, and similar publications
pertaining to continuing care or a continuing care retirement
community shall specify the number on the provider's provisional
certificate of authority or certificate of authority.
   (b) If the provider has not been issued a certificate of
authority, all advertising materials shall specify both of the
following:
   (1) Whether an application has been filed.
   (2) If applicable, that a permit to accept deposits or a
provisional certificate of authority has been issued.
  SEC. 18.  Section 1773 of the Health and Safety Code is amended to
read:
   1773.  (a) A provisional certificate of authority or certificate
of authority may not be sold, transferred, or exchanged in any
manner.  A provider may not sell or transfer ownership of the
continuing care retirement community without the approval of the
department.  Any violation of this section shall cause the applicable
provisional certificate of authority or certificate of authority to
be forfeited by operation of law pursuant to subdivision (c) of
Section 1793.7.
   (b) A provider may not enter into a contract with a third party
for overall management of the continuing care retirement community
without the approval of the department.  The department shall review
the transaction for consistency with this chapter.
   (c) Any violation of this section shall be grounds for revocation
for the provider's provisional certificate of authority or
certificate of authority under Section 1793.21.
  SEC. 19.  Section 1774 of the Health and Safety Code is amended to
read:
   1774.  No arrangement allowed by a permit to accept deposits, a
provisional certificate or authority, or a certificate of authority
issued by the department under this chapter may be deemed a security
for any purpose.
  SEC. 20.  Section 1775 of the Health and Safety Code is amended to
read:
   1775.  (a) To the extent that this chapter, as interpreted by the
department, conflicts with the statutes, regulations, or
interpretations governing the sale or hire of real property, this
chapter shall prevail.
   (b) Notwithstanding any law or regulation to the contrary, a
provider for a continuing care retirement community may restrict or
abridge the right of any resident, whether or not the resident owns
an equity interest, to sell, lease, encumber, or otherwise convey any
interest in the resident's unit, and may require that the resident
only sell, lease, or otherwise convey the interest to persons
approved by the provider.  Provider approval may be based on factors
which include, but are not limited to, age, health status, insurance
risk, financial status, or burden on the provider's personnel,
resources, or physical facility.  The provider shall record any
restrictions on a real property interest.
   (c) To the extent that this chapter conflicts with Sections 51.2
and 51.3 of the Civil Code, this chapter shall have precedence.  A
continuing care provider, at its discretion, may limit entrance based
on age.
   (d) This chapter imposes minimum requirements upon any entity
promising to provide, proposing to promise to provide, or providing
continuing care.
   (e) This chapter shall be liberally construed for the protection
of persons attempting to obtain or receiving continuing care.
   (f) A resident's entry into a continuing care contract described
in this chapter shall be presumptive evidence of the resident's
intent not to return to his or her prior residence to live for
purposes of qualifying for Medi-Cal coverage under Sections 14000 et
seq. of the Welfare and Institutions Code and Section 50425 of Title
22 of the California Code of Regulations.
  SEC. 21.  Section 1776.6 of the Health and Safety Code is amended
to read:
   1776.6.  (a) Pursuant to the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1
of the Government Code) and the Information Practices Act of 1977
(Chapter 1 (commencing with Section 1798) of Title
                        1.8 of Part 4 of Division 3 of the Civil
Code), the following documents are public information and shall be
provided by the department upon request:  audited financial
statements, annual reports and accompanying documents, compliance or
noncompliance with reserve requirements, whether an application for a
permit to accept deposits and certificate of authority has been
filed, whether a permit or certificate has been granted or denied,
and the type of care offered by the provider.
   (b) The department shall regard resident data used in the
calculation of reserves as confidential.
  SEC. 22.  Section 1777 of the Health and Safety Code is amended to
read:
   1777.  (a) The Continuing Care Advisory Committee of the
department shall act in an advisory capacity to the department on
matters relating to continuing care contracts.
   (b) The members of the committee shall include:
   (1) Three representatives of nonprofit continuing care providers
pursuant to this chapter, each of whom shall have offered continuing
care services for at least five years prior to appointment.  One
member shall represent a multifacility provider and shall be
appointed by the Governor in even years.  One member shall be
appointed by the Senate Committee on Rules in odd years.  One member
shall be appointed by the Speaker of the Assembly in odd years.
   (2) Three senior citizens who are not eligible for appointment
pursuant to paragraphs (1) and (4) who shall represent consumers of
continuing care services, at least two of whom shall be residents of
continuing care retirement communities but not residents of the same
provider.  One senior citizen member shall be appointed by the
Governor in even years.  One senior citizen member shall be appointed
by the Senate Committee on Rules in odd years.  One senior citizen
member shall be appointed by the Speaker of the Assembly in odd
years.
   (3) A certified public accountant with experience in the
continuing care industry, who is not a provider of continuing care
services.  This member shall be appointed by the Governor in even
years.
   (4) A representative of a for-profit provider of continuing care
contracts pursuant to this chapter.  This member shall be appointed
by the Governor in even years.
   (5) An actuary.  This member shall be appointed by the Governor in
even years.
   (c) Commencing January 1, 1997, all members shall serve two-year
terms and be appointed based on their interest and expertise in the
subject area.  The Governor shall designate the chairperson for the
committee with the advice and consent of the Senate.  A member may be
reappointed at the pleasure of the appointing power.  The appointing
power shall fill all vacancies on the committee within 60 days.  All
members shall continue to serve until their successors are appointed
and qualified.
   (d) The members of the committee shall serve without compensation,
except that each member shall be paid from the Continuing Care
Provider Fee Fund a per diem of twenty-five dollars ($25) for each
day's attendance at a meeting of the committee not to exceed six days
in any month.  The members of the committee shall also receive their
actual and necessary travel expenses incurred in the course of their
duties.  Reimbursement of travel expenses shall be at rates not to
exceed those applicable to comparable state employees under
Department of Personnel Administration regulations.
   (e) Prior to commencement of service, each member shall file with
the department a statement of economic interest and a statement of
conflict of interest pursuant to Article 3 (commencing with Section
87300) of the Government Code.
   (f) If, during the period of appointment, any member no longer
meets the qualifications of subdivision (b), that member shall submit
his or her resignation to their appointing power and a qualified new
member shall be appointed by the same power to fulfill the remainder
of the term.
  SEC. 23.  Section 1777.2 of the Health and Safety Code is amended
to read:
   1777.2.  (a) The Continuing Care Advisory Committee shall:
   (1) Review the financial and managerial condition of continuing
care retirement communities operating under a certificate of
authority.
   (2) Review the financial condition of any continuing care
retirement community that the committee determines is indicating
signs of financial difficulty and may be in need of close
supervision.
   (3) Monitor the condition of those continuing care retirement
communities that the department or the chair of the committee may
request.
   (4) Make available consumer information on the selection of
continuing care contracts and necessary contract protections in the
purchase of continuing care contracts.
   (5) Review new applications regarding financial, actuarial, and
marketing feasibility as requested by the department.
   (b) The committee shall make recommendations to the department
regarding needed changes in its rules and regulations and upon
request provide advice regarding the feasibility of new continuing
care retirement communities and the correction of problems relating
to the management or operation of any continuing care retirement
community.  The committee shall also perform any other advisory
functions necessary to improve the management and operation of
continuing care retirement communities.
   (c) The committee may report on its recommendations directly to
the director of the department.
   (d) The committee may hold meetings, as deemed necessary to the
performance of its duties.
  SEC. 24.  Section 1777.4 of the Health and Safety Code is amended
to read:
   1777.4.  Any member of the Continuing Care Advisory Committee is
immune from civil liability based on acts performed in his or her
official capacity.  Costs of defending civil actions brought against
a member for acts performed in his or her official capacity shall be
borne by the complainant.  However, nothing in this section immunizes
any member for acts or omissions performed with malice or in bad
faith.
  SEC. 25.  Section 1779 of the Health and Safety Code is amended to
read:
   1779.  (a) An entity shall file an application for a permit to
accept deposits and for a certificate of authority with the
department, as set forth in this chapter, before doing any of the
following:
   (1) Accepting any deposit, reservation fee, or any other payment
that is related to a promise or proposal to promise to provide
continuing care.
   (2) Entering into any reservation agreement, deposit agreement, or
continuing care contract.
   (3) Commencing construction of a prospective continuing care
retirement community.  If the project is to be constructed in phases,
the application shall include all planned phases.
   (4) Expanding an existing continuing care retirement community
whether by converting existing buildings or by new construction.
   (5) Converting an existing structure to a continuing care
retirement community.
   (6) Recommencing marketing on a planned continuing care retirement
community when the applicant has previously forfeited a permit to
accept deposits pursuant to Section 1703.7.
   (7) Executing new continuing care contracts after a provisional
certificate of authority or certificate of authority has been
inactivated, revoked, surrendered, or forfeited.
   (8) Closing the sale or transfer of a continuing care retirement
community or assuming responsibility for continuing care contracts.
   (b) For purposes of paragraph (4) of subdivision (a), an expansion
of a continuing care retirement community shall be deemed to occur
when  there is an increase in the capacity stated on the residential
care facility for the elderly license issued to the continuing care
retirement community, an increase in the number of units at the
continuing care retirement community, an increase in the number of
skilled nursing beds, or additions to or replacement of existing
continuing care retirement community structures that may affect
obligations to current residents.
   (c) Any provider that alters, or proposes to alter, its
organization, including by means of a change in the type of entity it
is, separation from another entity, merger, affiliation, spinoff, or
sale, shall file a new application and obtain a new certificate of
authority before the new entity may enter into any new continuing
care contracts.
   (d) A new application shall not be required for an entity name
change if there is no change in the entity structure or management.
If the provider undergoes a name change, the provider shall notify
the department in writing of the name change and shall return the
previously issued certificate of authority for reissuance under the
new name.
   (e) Within 10 days of submitting an application for a certificate
of authority pursuant to paragraph (3), (4), (7), or (8) of
subdivision (a), the provider shall notify residents of the provider'
s existing community or communities of its application.  The provider
shall notify its resident associations of any filing with the
department to obtain new financing, additional financing for a
continuing care retirement community, the sale or transfer of a
continuing care retirement community, any change in structure, and of
any applications to the department for any expansion of a continuing
care retirement community.  A summary of the plans and application
shall be posted in a prominent location in the continuing care
retirement community so as to be accessible to all residents and the
general public, indicating in the summary where the full plans and
application may be inspected in the continuing care retirement
community.
   (f) When the department determines that it has sufficient
information on the provider or determines that the provisions do not
apply and the protections provided by this article are not
compromised, the department may eliminate all or portions of the
application contents required under Section 1779.4 for applications
filed pursuant to paragraphs (4), (5), (6), (7), and (8) of
subdivision (a) or pursuant to subdivision (c).
  SEC. 26.  Section 1779.2 of the Health and Safety Code is amended
to read:
   1779.2.  (a) Any entity filing an application for a permit to
accept deposits  and a certificate of authority shall pay an
application fee.
   (b) The applicant shall pay 80 percent of the application fee for
all planned phases at the time the applicant submits its application.
  The 80 percent payment shall be made by check payable to the
Continuing Care Provider Fee Fund.  The department shall not process
the application until it has received this fee.
   (c) For new continuing care retirement communities or for the sale
or transfer of existing continuing care retirement communities, the
application fee shall be calculated as one-tenth of 1 percent of the
purchase price of the continuing care retirement community, or the
estimated construction cost, including the purchase price of the land
or the present value of any long-term lease and all items listed in
subparagraph (D) of paragraph (2) of subdivision (y) of Section
1779.4.
   (d) For existing continuing care retirement communities that are
proposing new phases, remodeling or an expansion, the application fee
shall be calculated as one-tenth of 1 percent of the cost of the
addition, annexation, or renovation, including the value of the land
and improvements and all items listed in subparagraph (D) of
paragraph (2) of subdivision (y) of Section 1779.4.
   (e) For existing facilities converting to continuing care
retirement communities, the application fee shall be calculated as
one-tenth of 1 percent of the current appraised value of the
facility, including the land, or present value of any long-term
lease.
   (f) For organizational changes, the application fee shall be
determined by the department based on the time and resources it
considers reasonably necessary to process the application, including
any consultant fees.  The minimum application fee for those
applications shall be two thousand dollars ($2,000).
   (g) The applicant shall pay the remainder of the application fee
before the provisional certificate of authority is issued, or in the
case of expansions or remodeling, before final approval of the
project is granted.  The applicant shall make this payment by check
payable to the Continuing Care Provider Fee Fund.
  SEC. 27.  Section 1779.4 of the Health and Safety Code is amended
to read:
   1779.4.  An application shall contain all of the following:
   (a) A statement signed by the applicant under penalty of perjury
certifying that to the best of the applicant's knowledge and belief,
the items submitted in the application are correct.  If the applicant
is a corporation, the chief executive officer shall sign the
statement.  If there are multiple applicants, these requirements
shall apply to each applicant.
   (b) The name and business address of the applicant.
   (c) An itemization of the total fee calculation, including sources
of figures used, and a check in the amount of 80 percent of the
total application fee.
   (d) The name, address, and a description of the real property of
the continuing care retirement community.
   (e) An estimate of the number of continuing care residents at the
continuing care retirement community.
   (f) A description of the proposed continuing care retirement
community, including the services and care to be provided to
residents or available for residents.
   (g) A statement indicating whether the application is for a
certificate of authority to enter into continuing care or life care
contracts.
   (h) A license to operate the proposed continuing care retirement
community as a residential care facility for the elderly or
documentation establishing that the applicant has received a
preliminary approval for licensure from the department's Community
Care Licensing Division.
   (i) A license to operate the proposed skilled nursing facility or
evidence that an application has been filed with the Licensing and
Certification Division of the State Department of Health Services, if
applicable.
   (j) A statement disclosing any revocation or other disciplinary
action taken, or in the process of being taken, against a license,
permit, or certificate held or previously held by the applicant.
   (k) A description of any matter in which any interested party
involved with the proposed continuing care retirement community has
been convicted of a felony or pleaded nolo contendere to a felony
charge, or been held liable or enjoined in a civil action by final
judgment, if the felony or civil action involved fraud, embezzlement,
fraudulent conversion, or the misappropriation of property.  For the
purpose of this subdivision, "interested party" includes any
representative of the developer of the proposed continuing care
retirement community or the applicant, including all general
partners, executive officers, or chief operating officers and board
members of corporations; and managing members and managers of limited
liability companies for each entity; who has significant
decisionmaking authority with respect to the proposed continuing care
retirement community.
   (l) If the applicant is an entity other than an individual, the
following information shall also be submitted:
   (1) A statement identifying the type of legal entity and listing
the interest and extent of the interest of each principal in the
legal entity.  For the purposes of this paragraph, "principal" means
any person or entity having a financial interest in the legal entity
of 10 percent or more.  When the application is submitted in the name
of a corporation, the parent, sole corporate shareholder, or sole
corporate member who controls the operation of the continuing care
retirement community shall be listed as an applicant.  When multiple
corporate applicants exist, they shall be listed jointly by corporate
name on the application, and the certificate of authority shall be
issued in the joint names of the corporations.  When the application
is submitted by a partnership, all general partners shall be named as
coapplicants and the department shall name them as coproviders on
any certificate of authority it issues.
   (2) The names of the members of the provider's governing body.
   (3) A statement indicating whether the applicant was or is
affiliated with a religious, charitable, nonprofit or for-profit
organization, and the extent of any affiliation.  The statement shall
also include the extent, if any, to which the affiliate organization
will be responsible for the financial and contract obligations of
the applicant and shall be signed by a responsible officer of the
affiliate organization.
   (4) A statement identifying any parent entity or other affiliate
entity, the primary activities of each entity identified, the
relationship of each entity to the applicant, and the interest in the
applicant held by each entity.
   (5) Copies of all contracts, management agreements, or other
documents setting forth the relationships with each of the other
entities.
   (6) A statement indicating whether the applicant, a principal, a
parent entity, affiliate entity, subsidiary entity, any responsible
employee, manager, or board member, or anyone who profits from the
continuing care retirement community has had applied against it any
injunctive or restrictive order of a court of record, or any
suspension or revocation of any state or federal license, permit, or
certificate, arising out of or relating to business activity of
health or nonmedical care, including, but not limited to, actions
affecting a license to operate a health care institution, nursing
home, intermediate care facility, hospital, home health agency,
residential care facility for the elderly, community care facility,
or child day care facility.
   (m) A description of the business experience of the applicants in
the operation or management of similar facilities.
   (n) A copy of any advertising material regarding the proposed
continuing care retirement community prepared for distribution or
publication.
   (o) Evidence of the bonds required by Section 1789.8.
   (p) A copy of any proposed reservation agreement.
   (q) A copy of the proposed deposit agreements.
   (r) The name of the proposed escrow agent and depository.
   (s) Any copies of reservation and deposit escrow account
agreements.
   (t) A copy of any proposed continuing care contracts.
   (u) A statement of any monthly care fees to be paid by residents,
the components and services considered in determining the fees, and
the manner by which the provider may adjust these fees in the future.
  If the continuing care retirement community is already in
operation, or if the provider operates one or more similar continuing
care retirement communities within this state, the statement shall
include tables showing the frequency and each percentage increase in
monthly care rates at each continuing care retirement community for
the previous five years, or any shorter period for which each
continuing care retirement community may have been operated by the
provider or his or her predecessor in interest.
   (v) A statement of the actions that have been, or will be, taken
by the applicant to fund reserves as required by Section 1792 or
1792.6 and to otherwise ensure that the applicant will have adequate
finances to fully perform continuing care contract obligations.  The
statement shall describe actions such as establishing restricted
accounts, sinking funds, trust accounts, or additional reserves.  If
the applicant is purchasing an existing continuing care retirement
community from a selling provider, the applicant shall provide an
actuarial report to determine the liabilities of existing continuing
care contracts and demonstrate the applicant's ability to fund those
obligations.
   (w) A copy of audited financial statements for the three most
recent fiscal years of the applicant or any shorter period of time
the applicant has been in existence, prepared in accordance with
generally accepted accounting principles and accompanied by an
independent auditor's report from a reputable firm of certified
public accountants.  The audited financial statements shall be
accompanied by a statement signed and dated by both the chief
financial officer and chief executive officer for the applicant or,
if applicable, by each general partner, or each managing member and
manager, stating that the financial statements are complete, true,
and correct in all material matters to the best of their knowledge.
   (x) Unaudited interim financial statements shall be included if
the applicant's fiscal year ended more than 90 days prior to the date
of filing.  The statements shall be either quarterly or monthly, and
prepared on the same basis as the annual audited financial
statements or any other basis acceptable to the department.
   (y) A financial study and a marketing study that reasonably
project the feasibility of the proposed continuing care retirement
community and are prepared by a firm or firms acceptable to the
department.  These studies shall address and evaluate, at a minimum,
all of the following items:
   (1) The applicant and its prior experience, qualifications, and
management, including a detailed description of the applicant's
proposed continuing care retirement community, its service package,
fee structure, and anticipated opening date.
   (2) The construction plans, construction financing, and permanent
financing for the proposed continuing care retirement community,
including a description of the anticipated source, cost, terms, and
use of all funds to be used in the land acquisition, construction,
and operation of the continuing care retirement community.  This
proposal shall include, at a minimum, all of the following:
   (A) A description of all debt to be incurred by the applicant for
the continuing care retirement community, including the anticipated
terms and costs of the financing.  The applicant's outstanding
indebtedness related to the continuing care retirement community may
not, at any time, exceed the appraised value of the continuing care
retirement community.
   (B) A description of the source and amount of the equity to be
contributed by the applicant.
   (C) A description of the source and amount of all other funds,
including entrance fees, that will be necessary to complete and
operate the continuing care retirement community.
   (D) A statement itemizing all estimated project costs, including
the real property costs and the cost of acquiring or designing and
constructing the continuing care retirement community, and all other
similar costs that the provider expects to incur prior to the
commencement of operation.  This itemization shall identify all costs
related to the continuing care retirement community or project,
including financing expenses, legal expenses, occupancy development
costs, marketing costs, and furniture and equipment.
   (E) A description of the interest expense, insurance premiums, and
property taxes that will be incurred prior to opening.
   (F) An estimate of any proposed continuing care retirement
community reserves required for items such as debt service, insurance
premiums, and operations.
   (G) An estimate of the amount of funds, if any, that will be
necessary to fund startup losses, fund statutory and refundable
contract reserves, and to otherwise provide additional financial
resources in an amount sufficient to ensure full performance by the
provider of its continuing care contract obligations.
   (3) An analysis of the potential market for the applicant's
continuing care retirement community, addressing such items as:
   (A) A description of the service area, including its demographic,
economic, and growth characteristics.
   (B) A forecast of the market penetration the continuing care
retirement community will achieve based on the proposed fee
structure.
   (C) Existing and planned competition in and about the primary
service area.
   (4) A detailed description of the sales and marketing plan,
including all of the following:
   (A) Marketing projections, anticipated sales, and cancellation
rates.
   (B) Month-by-month forecast of unit sales through sellout.
   (C) A description of the marketing methods, staffing, and
advertising media to be used by the applicant.
   (D) An estimate of the total entrance fees to be received from
residents prior to opening the continuing care retirement community.

   (5) Projected move-in rates, deposit collections, and resident
profiles, including couple mix by unit type, age distribution, care
and nursing unit utilization, and unit turnover or resale rates.
   (6) A description or analysis of development-period costs and
revenues throughout the development of the proposed continuing care
retirement community.
   (z) Projected annual financial statements for the period
commencing on the first day of the applicant's current fiscal year
through at least the fifth year of operation.
   (1) Projected annual financial statements shall be prepared on an
accrual basis using the same accounting principles and procedures as
the audited financial statements furnished pursuant to subdivision
(x).
   (2) Separate projected annual cash-flow statements shall be
provided.  These statements shall show projected annual cash-flows
for the duration of any debt associated with the continuing care
retirement community.  If the continuing care retirement community
property is leased, the cash-flow statement shall demonstrate the
feasibility of closing the continuing care retirement community at
the end of the lease period.
   (A) The projected annual cash-flow statements shall be submitted
using prevailing rates of interest, and assume no increase of
revenues and expenses due to inflation.
   (B) The projected annual cash-flow statements shall include all of
the following:
   (i) A detailed description and a full explanation of all
assumptions used in preparing the projections, accompanied by
supporting supplementary schedules and calculations, all to be
consistent with the financial study and marketing study furnished
pursuant to subdivision (y).  The department may require such other
supplementary schedules, calculations, or projections as it
determines necessary for an adequate application.
   (ii) Cash-flow from monthly operations showing projected revenues
for monthly fees received from continuing care contracts, medical
unit fees if applicable, other periodic fees, gifts and bequests used
in operations, and any other projected source of revenue from
operations less operating expenses.
     (iii) Contractual cash-flow from activities showing projected
revenues from presales, deposit receipts, entrance fees, and all
other projected sources of revenue from activities, less contract
acquisition, marketing, and advertising expenditures.
   (iv) Cash-flows from financing activities, including, but not
limited to, bond or loan proceeds less bond issue or loan costs and
fees, debt service including CAL Mortgage Insurance premiums, trustee
fees, principal and interest payments, leases, contracts, rental
agreements, or other long-term financing.
   (v) Cash-flows from investment activities, including, but not
limited to, construction progress payments, architect and engineering
services, furnishings, and equipment not included in the
construction contract, project development, inspection and testing,
marketable securities, investment earnings, and interfund transfers.

   (vi) The increase or decrease in cash during the projection
period.
   (vii) The beginning cash balance, which means cash, marketable
securities, reserves, and other funds on hand, available, and
committed to the proposed continuing care retirement community.
   (viii) The cash balance at the end of the period.
   (ix) Details of the components of the ending cash balance shall be
provided for each period presented, including, but not limited to,
the ending cash balances for bond reserves, other reserve funds,
deposit funds, and construction funds balance.
   (3) If the cash-flow statements required by paragraph (2) indicate
that the provider will have cash balances exceeding two months'
projected operating expenses of the continuing care retirement
community, a description of the manner in which the cash balances
will be invested, and the persons who will be making the investment
decisions, shall accompany the application.
   (4) The department may require the applicant to furnish additional
data regarding its operating budgets, projections of cash required
for major repairs and improvements, or any other matter related to
its projections including additional information, schedules, and
calculations regarding occupancy rate projections, unit types, couple
mix, sex and age estimates for resident mix, turnover rates, refund
obligations, and sales.
   (aa) (1) A declaration by the applicant acknowledging that it is
required to execute and record a Notice of Statutory Limitation on
Transfer relating to continuing care retirement community property.
   (2) The notice required in this subdivision shall be acknowledged
and suitable for recordation, describe the property, declare the
applicant's intention to use all or part of the described property
for the purposes of a continuing care retirement community pursuant
to this chapter, and shall be in substantially the following form:
      "NOTICE OF STATUTORY LIMITATION ON TRANSFER

   Notice is hereby given that the property described below is
licensed, or proposed to be licensed, for use as a continuing care
retirement community and accordingly, the use and transfer of the
property is subject to the conditions and limitations as to use and
transfer set forth in Sections 1773 and 1789.4 of the Health and
Safety Code.  This notice is recorded pursuant to subdivision (aa) of
Section 1779.4 of the Health and Safety Code.
   The real property, which is legally owned by (insert the name of
the legal owner) and is the subject of the statutory limitation to
which this notice refers, is more particularly described as follows:
(Insert the legal description and the assessor's parcel number of
the real property to which this notice applies.)"

   (3) The Notice of Statutory Limitation on Transfer shall remain in
effect until notice of release is given by the department.  The
department shall execute and record a release of the notice upon
proof of complete performance of all obligations to residents.
   (4) Unless a Notice of Statutory Limitation on Transfer has been
recorded with respect to the land on which the applicant or provider
is operating, or intends to operate a continuing care retirement
community, prior to the date of execution of any trust deed,
mortgage, or any other lien or encumbrance securing or evidencing the
payment of money and affecting land on which the applicant or
provider intends to operate a continuing care retirement community,
the applicant or provider shall give the department advance written
notice of the proposed encumbrance.  Upon the giving of notice to the
department, the applicant or provider shall execute and record the
Notice of Statutory Limitation on Transfer in the office of the
county recorder in each county in which any portion of the continuing
care retirement community is located prior to encumbering the
continuing care retirement community property with the proposed
encumbrance.
   (5) In the event that the applicant or provider and the owner of
record are not the same entity on the date on which execution and
recordation of the notice is required, the leasehold or other
interest in the continuing care retirement community property held by
the applicant or provider shall survive in its entirety and without
change, any transfer of the continuing care retirement community
property by the owner.  In addition, the applicant or provider shall
record a memorandum of leasehold or other interest in the continuing
care retirement community property that includes a provision stating
that its interest in the property survives any transfer of the
property by the owner.  The applicant or provider shall provide a
copy of the notice and the memorandum of interest to the owner of
record by certified mail and to the department.
   (6) The notice shall, and, if applicable, the memorandum of
interest shall be indexed by the recorder in the grantor-grantee
index to the name of the owner of record and the name of the
applicant or provider.
   (ab) A statement that the applicant will keep the department
informed of any material changes to the proposed continuing care
retirement community or its application.
   (ac) Any other information that may be required by the department
for the proper administration and enforcement of this chapter.
  SEC. 28.  Section 1779.6 of the Health and Safety Code is amended
to read:
   1779.6.  (a) Within seven calendar days of receipt of an initial
application for a permit to accept deposits and a certificate of
authority, the department shall acknowledge receipt of the
application in writing.
   (b) Within 30 calendar days following its receipt of an
application, the department shall determine if the application is
complete and inform the applicant of its determination.  If the
department determines that the application is incomplete, its notice
to the applicant shall identify the additional forms, documents,
information, and other materials required to complete the
application.  The department shall allow the applicant adequate time
to submit the requested information and materials.  This review may
not determine the adequacy of the materials included in the
application.
   (c) Within 120 calendar days after the department determines that
an application is complete, the department shall review the
application for adequacy.  An application shall be adequate if it
complies with all the requirements imposed by this chapter, and both
the financial study and marketing study reasonably project the
feasibility of the proposed continuing care retirement community, as
well as demonstrate the financial soundness of the applicant.  The
department shall either approve the application as adequate under
this chapter or notify the applicant that its application is
inadequate.  If the application is inadequate, the department shall
identify the deficiencies in the application, provide the appropriate
code references, and give the applicant an opportunity to respond.
   (d) Within 60 calendar days after receiving any additional
information or clarification required from the applicant, the
department shall respond to the applicant's submission in writing and
state whether each specific deficiency has been addressed
sufficiently to make the application adequate.  If the department
determines that the application is adequate and in compliance with
this chapter, the department shall issue the permit to accept
deposits.  If the department determines that the response is
inadequate, it may request additional information or clarification
from the applicant pursuant to subdivision (c) or deny the
application pursuant to Section 1779.10.
   (e) If the applicant does not provide the department with the
additional information within 90 days after the department's notice
described in subdivision (c), the application may be denied for being
inadequate.  Any new application shall require an application fee.

  SEC. 28.5.  Section 1779.7 is added to the Health and Safety Code,
to read:
   1779.7.  (a) Where any portion of the consideration transferred to
an applicant as a deposit or to a provider as consideration for a
continuing care contract is transferred by a person other than the
prospective resident or a resident, that third-party transferor shall
have the same cancellation or refund rights as the prospective
resident or resident for whose benefit this consideration was
transferred.
   (b) A transferor shall have the same rights to cancel and obtain a
refund as the depositor under the deposit agreement or the resident
under a continuing care contract.
  SEC. 29.  Section 1779.8 of the Health and Safety Code is amended
to read:
   1779.8.  (a) The applicant shall notify the department of material
changes in the application information submitted to the department,
including the applicant's financial and marketing projections.
   (b) An applicant shall provide to the department at least 60 days'
advance written notice of any proposal to make any changes in the
applicant's corporate name, structure, organization, operation, or
financing.
   (c) Within 30 calendar days after receiving notice of a change
affecting the applicant or the application, the department shall
advise the applicant:
   (1) Whether additional information is required to process the
pending application.
   (2) Whether an additional application fee is required.
   (3) Whether a new application and application fee must be
submitted.  The new application fee shall be twice the actual cost of
additional review time caused by the change.  This additional fee is
payable to the department on demand.
   (d) The department shall suspend the applicant's application and,
if applicable, its permit to accept deposits if the applicant fails
to give written notice of changes required by this section.  The
suspension shall remain in effect until the department has both
assessed the potential impact of the changes on the interests of
depositors and taken such action as necessary under this chapter to
protect these interests.
  SEC. 30.  Section 1779.10 of the Health and Safety Code is amended
to read:
   1779.10.  (a) The department shall deny an application for a
permit to accept deposits and a certificate of authority if the
applicant fails to do any of the following:
   (1) Pay the application fee as required by Section 1779.2.
   (2) Submit all information required by this chapter.
   (3) Submit evidence to support a reasonable belief that any
interested party of the proposed continuing care retirement community
who has committed any offenses listed in subdivision (k) of Section
1779.4 is of such good character as to indicate rehabilitation.
   (4) Submit evidence to support a reasonable belief that the
applicant is capable of administering the continuing care retirement
community in compliance with applicable laws and regulations when an
action specified in subdivision (j) or (k) of Section 1779.4 has been
taken against the applicant.
   (5) Demonstrate the feasibility of the proposed continuing care
retirement community.
   (6) Comply with residential care facility for the elderly
licensing requirements.
   (b) If the application is denied, no portion of the paid
application fee shall be refundable or refunded.
   (c) Immediately upon the denial of an application, the department
shall notify the applicant in writing.
   (d) The Notice of Denial from the department shall contain all of
the following:
   (1) A statement that the application is denied.
   (2) The grounds for the denial.
   (3) A statement informing the applicant that it has the right to
appeal.
   (4) A statement that the applicant has 30 calendar days from the
date that the Notice of Denial was mailed to appeal the denial, and
where to send the appeal.
   (e) If the applicant appeals the denial, further proceedings shall
be conducted in accordance with Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code.
  SEC. 31.  Section 1780 of the Health and Safety Code is amended to
read:
   1780.  The department shall issue a permit to accept deposits when
it has done all of the following:
   (a) Determined that the application is adequate.
   (b) Determined that the proposed continuing care retirement
community financial and marketing studies are acceptable.
   (c) Reviewed and approved the deposit agreements.
   (d) Reviewed and approved the deposit escrow account agreement.
  SEC. 32.  Section 1780.2 of the Health and Safety Code is amended
to read:
   1780.2.  (a) A deposit may be paid in one or several payments, at
or after the time the parties enter into the deposit agreement.
   A deposit shall be paid by cash or cash equivalent, jointly
payable to the applicant and the escrow agent or depository.
Possession and control of any deposit agreement shall be transferred
to the escrow agent at the time the deposit is paid.
   (b) A processing fee may be added to the deposit.
   (1) The processing fee shall not exceed 1 percent of the amount of
the average entrance fee or five hundred dollars ($500), whichever
is greater.
   (2) A nonrefundable processing fee may be paid directly to the
applicant without being placed in the deposit escrow account.
   (c) Payments made by a depositor for upgrades or modifications to
the living unit shall not be placed in escrow with deposits.  The
applicant shall provide written refund policies to the depositor
before accepting any payments for modifications or upgrades.
   (d) The applicant shall furnish to the department within the first
10 days of each calendar month a list of all residents who have made
payments for modifications or upgrades, the amounts each resident
has paid, the date of each payment, and the unit to be modified or
upgraded for each resident.
   (e) All payments for modifications or upgrades shall be refunded
to the depositor with interest if the applicant does not receive a
certificate of authority for the proposed continuing care retirement
community or expansion.
   (f) The department may record a lien against the continuing care
retirement community property, or any portion of the continuing care
retirement community property, to secure the applicant's obligations
to refund the depositor's payments made for modifications or
upgrades.  Any lien created under this section shall be to protect
depositors and shall be governed by Section 1793.15.
  SEC. 33.  Section 1780.4 of the Health and Safety Code is amended
to read:
   1780.4.  (a) All deposit agreements between the applicant and the
depositor shall be in writing and shall contain all information
required by this section.
   (b) All deposit agreement forms shall be approved by the
department prior to their use.
   (c) The requirements of this chapter and Chapter 3.2 (commencing
with Section 1569) shall be the bases for approval of the forms by
the department.
   (d) All text in deposit agreement forms shall be printed in at
least 10-point typeface.
   (e) The deposit agreement form shall provide all of the following:

   (1) An estimated date for commencement of construction of the
proposed continuing care retirement community or, if applicable, each
phase not to exceed 36 months from the date the permit to accept
deposits is issued.
   (2) A statement to the effect that the applicant will notify
depositors of any material change in the application.
   (3) The identity of the specific unit reserved and the total
deposit for that unit.
   (4) Processing fee terms and conditions, including:
   (A) The amount.
   (B) A statement explaining the applicant's policy regarding refund
or retention of the processing fee in the event of death of the
depositor or voluntary cancellation by the depositor.
   (C) Notice that the processing fee shall be refunded within 30
days if the applicant does not accept the depositor for residency, or
the applicant fails to construct the continuing care retirement
community before the estimated date of completion and the department
determines that there is no satisfactory cause for the delay.
   (5) Requirements for payment of the deposit by the depositor.
   (6) A statement informing the depositor that their deposit
payments will be converted to an entrance fee payment at the time the
continuing care contract is executed.
   (7) A statement informing the depositor that deposits shall be
refunded within 30 calendar days of the depositor's nonacceptance for
residency or notice to the applicant of the death of the depositor.

   (8) A statement informing the depositor that all deposits shall be
refunded to the depositors if the continuing care retirement
community is not constructed by the estimated date of completion and
the department determines that there is no satisfactory cause for the
delay.
   (9) A statement informing the depositor that a refund of the
deposit within 10 calendar days of notice of cancellation by the
depositor.  The deposit agreement shall state that depositors who
have deposited more than one thousand dollars ($1,000) or 5 percent
of the entrance fee, whichever is greater, and who have been notified
that construction of the proposed continuing care retirement
community has commenced, will not be entitled to a refund of their
deposit until the provisional certificate of authority is issued or
after one of the following occurs:
   (A) Another depositor has reserved the canceling depositor's
specific residential unit and paid the necessary deposit.
   (B) The depositor no longer meets financial or health requirements
for admission.
   (C) The applicant fails to meet the requirements of Section 1786
or 1786.2.
   (10) A statement to depositors that specifies when funds may be
released from escrow to the applicant and explains that thereafter
the depositor's funds will not have escrow protection.
   (11) A statement advising the depositor whether interest will be
paid to the depositor on deposits placed in the deposit escrow
account.
   (f) If cash equivalents are to be accepted in lieu of cash, all of
the following shall also be included in the deposit agreement:
   (1) A statement that cash equivalents that may be accepted as
deposits shall be either certificates of deposit or United States
securities with maturities of five years or less.
   (2) A statement that the instruments will be held by the escrow
agent in the form in which they were delivered and assigned by the
depositor until they are replaced by cash or converted to cash.
   (3) A statement that the depositor will be required to assign the
instruments to a neutral third-party escrow agent.  If the bank or
entity that issued the instruments refuses to allow this assignment,
the escrow agent shall not accept the instruments.  These instruments
shall be reassigned to the depositor if the depositor terminates the
deposit agreement before the instruments mature.  If the depositor
terminates the deposit agreement after the instruments mature, the
depositor shall receive a cash refund of the portion of the deposit
represented by the matured instruments.
   (4) A statement that any amount by which the face value of the
deposited instruments exceeds the required deposit shall be deemed
part of the deposit and shall be applied against the depositor's
obligations under the deposit agreement.
   (5) A statement that the instruments shall be converted to, or
replaced with, cash prior to the department's authorization for the
release of deposits to the applicant.  The depositor shall be advised
that if the depositor does not substitute cash in the amount equal
to the deposit, the applicant may do either of the following:
   (A) Direct the escrow agent to sell, redeem, or otherwise convert
the instruments to cash and to treat the proceeds in the same manner
as it treats cash deposits under the deposit agreement.  The costs of
any such sale, redemption, or conversion, including, without
limitation, transaction fees and any early withdrawal penalties, may
be charged to the depositor and paid out of the cash or other
instruments received from the depositor in escrow.  If there is a
shortfall, the depositor may be immediately obligated to pay the
shortfall by check jointly payable to the applicant and the escrow
agent.
   (B) Terminate the deposit agreement.  In this event, the escrow
agent shall reassign the property to the depositor and refund all
cash in escrow within the time periods specified in the deposit
agreement.
   (g) A statement that deposits will be invested in instruments
guaranteed by the federal government or an agency of the federal
government, or in investment funds secured by federally guaranteed
instruments.
   (h) A statement that no funds deposited in a deposit escrow
account shall be subject to any liens, judgments, garnishments, or
creditor's claims against the applicant, the proposed continuing care
retirement community property, or the continuing care retirement
community.  The deposit agreement shall also provide that deposits
may not be subject to any liens or charges by the escrow agent,
except that cash equivalent deposits may be subject to transactions
fees, commissions, prepayment penalties, and other fees incurred in
connection with these deposits.
   (i) A schedule of projected monthly care fees estimated to be
charged to residents for each of the first five years of the
continuing care retirement community's existence shall be attached to
each deposit agreement.  This schedule shall contain a conspicuous
statement in at least 10-point boldface type that the projected fees
are an estimate only and may be changed without notice.
  SEC. 34.  Section 1781 of the Health and Safety Code is amended to
read:
   1781.  (a) All deposits, excluding processing fees, shall be
placed in an escrow account.  All terms governing the deposit escrow
account shall be approved in advance by the department.
   (b) The deposit escrow account shall be established by an escrow
agent and all deposits shall be deposited in a depository located in
California and approved by the department.  The department's approval
of the depository shall be based, in part, upon its ability to
ensure the safety of funds and properties entrusted to it and its
qualifications to perform the obligations of the depository pursuant
to the deposit escrow account agreement and this chapter.  The
depository may be the same entity as the escrow agent.  All deposits
shall be kept and maintained in a segregated account without any
commingling with other funds, including any funds or accounts owned
by the applicant.
   (c) If the escrow agent is a title company, it shall meet the
following requirements:
   (1) A Standard and Poors rating of "A" or better or a comparable
rating from a comparable rating service.
   (2) Licensure in good standing with the Department of Insurance.
   (3) Tangible net equity as required by the Department of
Insurance.
   (4) Reserves as required by the Department of Insurance.
   (d) All deposits shall remain in escrow until the department has
authorized release of the deposits, as provided in Section 1783.3.
   (e) Deposits shall be invested in instruments guaranteed by the
federal government or an agency of the federal government, or in
investment funds secured by federally guaranteed instruments.
   (f) No funds deposited in a deposit escrow account shall be
subject to any liens, judgments, garnishments, or creditor's claims
against the applicant or the continuing care retirement community.
The deposit agreement shall also provide that deposits may not be
subject to any liens or charges by the escrow agent except that cash
equivalent deposits may be subject to transaction fees, commissions,
prepayment penalties, and other fees incurred in connection with
those deposits.
  SEC. 35.  Section 1781.2 of the Health and Safety Code is amended
to read:
   1781.2.  (a) All deposits shall be delivered to the escrow agent
and deposited into the deposit escrow account within five business
days after receipt by the applicant.  The deposit escrow account
shall be accounted for in a separate escrow account.
   (b) The applicant shall provide, with all deposits delivered to
the escrow holder, a copy of the executed deposit agreement, a copy
of the receipt given to the depositor, a summary of all deposits made
on that date, and any other materials required by the escrow holder.

  SEC. 36.  Section 1781.4 of the Health and Safety Code is amended
to read:
   1781.4.  The deposit escrow account agreement between the
applicant and the escrow agent shall include all of the following:
   (a) The amount of the processing fee.
   (b) A provision requiring that all deposits shall be placed into
the deposit escrow account upon delivery.
   (c) A provision requiring that monthly progress reports be sent by
the escrow agent directly to the department, beginning the month
after the deposit escrow account is opened and continuing through the
month funds are released from escrow.  These reports shall be
prepared every month that there are any funds in the account and
shall show each of the following in separate columns:
   (1) The name and address of each depositor or resident.
   (2) The designation of the living unit being provided.
   (3) Any processing fee which is deposited into escrow.
   (4) The total deposit required for the unit.
   (5) The total entrance fee for the unit.
   (6) Twenty percent of the total entrance fee.
   (7) Each deposit payment made by or on behalf of the depositor and
any refunds paid to the depositor.
   (8) The unpaid balance for each depositor's deposit.
   (9) The unpaid balance for each depositor's entrance fee.
   (10) The current balance in the deposit escrow account for each
depositor and the collective balance.
                                           (11) The dollar amount,
type, and maturity date of any cash equivalent paid by each
depositor.
   (d) A provision for investment of escrow account funds in a manner
consistent with Section 1781.
   (e) A provision for refunds to depositors in the manner specified
by Section 1783.2.
   (f) A provision regarding the payment of interest earned on the
funds held in escrow in the manner specified in the applicant's
deposit agreement.
   (g) Release of deposit escrow account funds in the manner
specified in Section 1783.3, including to whom payment of interest
earned on the funds will be made.
   (h) Representations by the escrow agent that it is not, and shall
not be during the term of the deposit escrow account, a lender to the
applicant or for the proposed continuing care retirement community,
or a fiduciary for any lender or bondholder for that continuing care
retirement community, unless approved by the department.
   (i) If cash equivalents may be accepted as a deposit in lieu of
cash, the deposit escrow account agreement shall also include all of
the following:
   (1) Authorization for the escrow agent to convert instruments to
cash when they mature.  The escrow agent may notify all financial
institutions whose securities are held by the escrow agent that all
interest and other payments due upon these instruments shall be paid
to the escrow agent.  The escrow agent shall collect, hold, invest,
and disburse these funds as provided under the escrow agreement.
   (2) Authorization for the escrow agent to deliver the instruments
in its possession and release funds from escrow according to written
directions from the applicant, consistent with the terms provided in
the applicant's deposit escrow account agreement.  The escrow agent
shall distribute cash and other property to an individual depositor
only upon either of the following occurrences:
   (A) The depositor's written request to receive monthly payments of
interest accrued on his or her deposits.
   (B) Receipt of notice from the applicant to pay a refund to the
depositor.
   (3) A provision that the escrow agent shall maintain, at all
times, adequate records showing the beneficial ownership of the
instruments.
   (4) A provision that the escrow agent shall have no responsibility
or authority to initiate any transfer of the instruments or conduct
any other transaction without specific written instructions from the
applicant.
   (5) A provision authorizing, instructing, and directing the escrow
agent to do all of the following:
   (A) Redeem and roll over matured investments into money market
accounts or other department approved instruments with the escrow
agent or an outside financial institution.
   (B) Collect and receive interest, principal, and other things of
value in connection with the instruments.
   (C) Sign for the depositors any declarations, affidavits,
certificates, and other documents that may be required to collect or
receive payments or distributions with respect to the instruments.
  SEC. 37.  Section 1781.6 of the Health and Safety Code is amended
to read:
   1781.6.  All changes to a deposit agreement or deposit escrow
account agreement form shall be submitted to, and approved by, the
department before use by the applicant.
  SEC. 38.  Section 1781.8 of the Health and Safety Code is amended
to read:
   1781.8.  (a) Deposits held in escrow shall be placed in an
interest bearing account or invested as provided under subdivision
(e) of Section 1781.
   (b) Interest, income, and other gains derived from deposits held
in a deposit escrow account may not be released or distributed from
the deposit escrow account except upon written approval of the
department.
   (c) Approval by the department for the release of earnings
generated from funds held in escrow shall be based upon an assessment
that funds remaining in the deposit escrow account will be
sufficient to pay refunds and any interest promised to all
depositors, as well as administrative costs owed to the escrow agent.

   (d) When released by the department, interest earned by the funds
in the deposit escrow account shall be distributed in accordance with
the terms of the deposit agreement.
  SEC. 39.  Section 1781.10 of the Health and Safety Code is amended
to read:
   1781.10.  No deposit or any other asset held in a deposit escrow
account, shall be encumbered or used as collateral for any obligation
of the applicant or any other person, unless the applicant obtains
prior written approval from the department for the encumbrance or use
as collateral.  The department shall not approve any encumbrance or
use as collateral under this section unless the encumbrance or use as
collateral is expressly subordinated to the rights of depositors
under this chapter to refunds of their deposits.
  SEC. 40.  Section 1782 of the Health and Safety Code is amended to
read:
   1782.  (a) An applicant shall not begin construction on any phase
of a continuing care retirement community without first obtaining a
written acknowledgment from the department that all of the following
prerequisites have been met:
   (1) A completed application has been submitted to the department.

   (2) A permit to accept deposits has been issued to the applicant
or, in the case of continuing care retirement community renovation
projects, the department has issued a written approval of the
applicant's application.
   (3) For new continuing care retirement communities, or
construction projects adding new units to an existing continuing care
retirement community, deposits equal to at least 20 percent of each
depositor's applicable entrance fee have been placed into escrow for
each phase for at least 50 percent of the number of residential
living units to be constructed.
   (b) Applicants shall notify depositors in writing when
construction is commenced.
   (c) For purposes of this chapter only, construction shall not
include site preparation, demolition, or the construction of model
units.
  SEC. 41.  Section 1783 of the Health and Safety Code is amended to
read:
   1783.  (a) (1) An applicant proposing to convert an existing
building to continuing care use shall comply with all the application
requirements in Section 1779.4 identified by the department as
necessary for the department to assess the feasibility of the
proposed continuing care retirement community or conversion.
   (2) If the proposed continuing care retirement community is
already occupied and only a portion of the existing residential units
will be converted into continuing care units, the department may
modify the presale requirements of paragraph (3) of subdivision (a)
of Section 1782 and paragraph (2) of subdivision (a) of Section
1783.3.
   (b) Any applicant proposing to convert an existing building into
continuing care units shall indicate the portion of the facility to
be used for continuing care contract services.  The continuing care
allocation specified by the applicant shall be reflected in all
financial and marketing studies and shall be used to determine the
applicant's compliance with the percentage requirements stated in
paragraph (3) of subdivision (a) of Section 1782 and paragraph (2) of
subdivision (a) of Section 1783.3.
  SEC. 42.  Section 1783.2 of the Health and Safety Code is amended
to read:
   1783.2.  (a) An escrow agent shall refund to the depositor all
amounts required by the depositor's deposit agreement upon receiving
written notice from the applicant that a depositor has canceled the
deposit agreement.  Refunds required by this subdivision shall be
paid to the depositor within 10 days after the depositor gives notice
of cancellation to the applicant.
   (b) Depositors who have deposited more than one thousand dollars
($1,000) or 5 percent of the entrance fee, whichever is greater, and
who have been notified that construction of the proposed continuing
care retirement community has commenced, shall not be entitled to a
refund of their deposit until any of the following occurs:
   (1) The continuing care retirement community is opened for
operation.
   (2) Another depositor has reserved the canceling depositor's
specific residential unit and paid the necessary deposit.
   (3) The depositor no longer meets financial or health requirements
for admission.
  SEC. 43.  Section 1783.3 is added to the Health and Safety Code, to
read:
   1783.3.  (a) In order to seek a release of escrowed funds, the
applicant shall petition in writing to the department and certify to
each of the following:
   (1) The construction of the proposed continuing care retirement
community or phase is at least 50 percent completed.
   (2) At least 20 percent of the total of each applicable entrance
fee has been received and placed in escrow for at least 60 percent of
the total number of residential living units.  Any unit for which a
refund is pending may not be counted toward that 60-percent
requirement.
   (3) Deposits made with cash equivalents have been either converted
into, or substituted with, cash or held for transfer to the
provider.  A cash equivalent deposit may be held for transfer to the
provider, if all of the following conditions exist:
   (A) Conversion of the cash equivalent instrument would result in a
penalty or other substantial detriment to the depositor.
   (B) The provider and the depositor have a written agreement
stating that the cash equivalent will be transferred to the provider,
without conversion into cash, when the deposit escrow is released to
the provider under  this section.
   (C) The depositor is credited the amount equal to the value of the
cash equivalent.
   (4) The applicant's average performance over any six-month period
substantially equals or exceeds its financial and marketing
projections approved by the department, for that period.
   (5) The applicant has received a commitment for any permanent
mortgage loan or other long-term financing.
   (b) The department shall instruct the escrow agent to release to
the applicant all deposits in the deposit escrow account when all of
the following requirements have been met:
   (1) The department has confirmed the information provided by the
applicant pursuant to subdivision (a).
   (2) The department, in consultation with the Continuing Care
Advisory Committee, has determined that there has been substantial
compliance with projected annual financial statements that served as
a basis for issuance of the permit to accept deposits.
   (3) The applicant has complied with all applicable licensing
requirements in a timely manner.
   (4) The applicant has obtained a commitment for any permanent
mortgage loan or other long-term financing that is satisfactory to
the department.
   (5) The applicant has complied with any additional reasonable
requirements for release of funds placed in the deposit escrow
accounts, established by the department under Section 1785.
   (c) The escrow agent shall release the funds held in escrow to the
applicant only when the department has instructed it to do so in
writing.
   (d) When an application describes different phases of construction
that will be completed and commence operating at different times,
the department may apply the 50 percent construction completion
requirement to any one or group of phases requested by the applicant,
provided the phase or group of phases is shown in the applicant's
projections to be economically viable.
  SEC. 44.  Section 1784 of the Health and Safety Code is amended to
read:
   1784.  (a) If construction of the proposed continuing care
retirement community, or applicable phase, has not commenced within
36 months from the date the permit to accept deposits is issued, an
applicant may request an extension of the permit to accept deposits.
The request for extension shall be made to the department in writing
and shall include the reasons why construction of the proposed
continuing care retirement community was not commenced within the
required 36-month period.  The request for extension shall also state
the new estimated date for commencement of construction.
   (b) In response to a request for an extension, the department may
do one of the following:
   (1) If the department determines there is satisfactory cause for
the delay in commencement of construction of the proposed continuing
care retirement community or applicable phase, the department may
extend the permit to accept deposits for up to one year.
   (2) If the department determines that there is no satisfactory
cause for the delay, the department may instruct the escrow agent to
refund to depositors all deposits held in escrow, plus any interest
due under the terms of the deposit subscription agreements, and
require the applicant to file a new application and application fee.
The applicant shall also refund all processing fees paid by the
depositors.
   (c) Within 10 calendar days the applicant shall notify each
depositor of the department's approval or denial of the extension, of
any expiration of the permit to accept deposits and of any right to
a refund of their deposits.
  SEC. 45.  Section 1785 of the Health and Safety Code is amended to
read:
   1785.  (a) If, at any time prior to issuance of a certificate of
authority, the applicant's average performance over any six-month
period does not substantially equal or exceed the applicant's
projections for that period, the department, after consultation and
upon consideration of the recommendations of the Continuing Care
Advisory Committee, may take any of the following actions:
   (1) Cancel the permit to accept deposits and require that all
funds in escrow be returned to depositors immediately.
   (2) Increase the required percentages of construction completed,
units reserved, or entrance fees to be deposited as required under
Sections 1782, 1783.3, 1786, and 1786.2.
   (3) Increase the reserve requirements under this chapter.
   (b) Prior to taking any actions specified in subdivision (a), the
department shall give the applicant an opportunity to submit a
feasibility study from a consultant in the area of continuing care,
approved by the department, to determine whether in his or her
opinion the proposed continuing care retirement community is still
viable, and if so, to submit a plan of correction.  The department,
in consultation with the committee, shall determine if the plan is
acceptable.
   (c) In making its determination, the department shall take into
consideration the overall performance of the proposed continuing care
retirement community to date.
   (d) If deposits have been released from escrow, the department may
further require the applicant to reopen the escrow as a condition of
receiving any further entrance fee payments from depositors or
residents.
   (e) The department may require the applicant to notify all
depositors and, if applicable, all residents, of any actions required
by the department under this section.
  SEC. 46.  Section 1786 of the Health and Safety Code is amended to
read:
   1786.  (a) The department shall issue a provisional certificate of
authority when an applicant has done all of the following:
   (1) Complied with the approved marketing plans.
   (2) Met and continues to meet the requirements imposed under
subdivision (a) of Section 1783.3.  The issuance of the provisional
certificate of authority shall not require, and shall not be
dependent upon the release of escrowed funds.  Release of escrowed
funds shall be governed by Section 1783.3.
   (3) Completed construction of the continuing care retirement
community or applicable phase.
   (4) Obtained the required licenses.
   (5) Paid the remainder of the application fee.
   (6) Executed a permanent mortgage loan or other long-term
financing.
   (7) Provided the department with a recorded copy of the Notice of
Statutory Limitation on Transfer required by subdivision (aa) of
Section 1779.4.
   (8) Met all applicable provisions of this chapter.
   (b) The provisional certificate of authority shall expire 12
months after issuance unless both of the following occur:
   (1) No later than 60 days prior to the expiration of the
provisional certificate of authority, the provider petitions the
department and demonstrates good cause in writing for an extension of
the provisional certificate of authority.
   (2) The department determines that the provider is capable of
meeting the requirements of Section 1786.2 during the extension
period.
   (c) The department shall exercise its discretion to determine the
length of the extension period.
   (d) After the provisional certificate of authority is issued
providers may continue to take deposits by modifying the deposit
agreement as appropriate.  The new deposit agreement shall clearly
state the rights of the depositor and the provider.  The applicant
shall submit the agreements to the department for review and approval
prior to use.  A provider that holds a provisional certificate of
authority or certificate of authority may accept fees paid by
potential residents to be placed on a waiting list without using a
deposit agreement.  These waiting list fees may not exceed five
hundred dollars ($500), and shall be refunded to the potential
resident upon written request.
   (e) All holders of a provisional certificate of authority shall
request in writing a certificate of authority when the requirements
of Section 1786.2 have been met.
  SEC. 47.  Section 1786.2 of the Health and Safety Code is amended
to read:
   1786.2.  (a) The department shall not issue a certificate of
authority to an applicant or a provider, until the department
determines that each of the following has occurred:
   (1) A provisional certificate of authority has been issued or all
of the requirements for a provisional certificate of authority have
been satisfied.  In the case of an application for a new certificate
of authority due to an organizational change, if the continuing care
retirement community is financially sound and operating in compliance
with this chapter, it shall be sufficient for the purposes of this
paragraph that the department has approved the application in
writing.
   (2) One of the following requirements has been met:
   (A) At a minimum, continuing care contracts have been executed for
80 percent of the total residential living units in the continuing
care retirement community, with payment in full of the entrance fee.

   (B) At a minimum, continuing care contracts have been executed for
70 percent of the total residential living units in the continuing
care retirement community, with payment in full of the entrance fee,
and the provider has submitted an updated financial and marketing
plan, satisfactory to the department, demonstrating that the proposed
continuing care retirement community will be financially viable.
   (C) At a minimum, continuing care contracts have been executed for
50 percent of the total residential living units in the continuing
care retirement community, with payment in full of the entrance fee,
and the provider furnishes and maintains a letter of credit or other
security, satisfactory to the department, sufficient to bring the
total amount of payments to a level equivalent to 80 percent of the
total entrance fees for the entire continuing care retirement
community.
   (3) A minimum five-year financial plan of operation remains
satisfactory to the department.
   (4) Adequate reserves exist as required by Sections 1792 and
1792.6.  For a new continuing care retirement community without an
operating history, the department may approve calculation of required
reserves on a pro forma basis in conjunction with compliance with
approved marketing plans.
   (5) All applicable provisions of this chapter have been met.
   (b) When issued, the certificate of authority, whether full or
conditioned, shall remain in full force unless forfeited by operation
of law under Section 1793.7, inactivated under Section 1793.8, or
suspended or revoked by the department pursuant to Section 1793.21.
   (c) The provider shall display the certificate of authority in a
prominent place within the continuing care retirement community.
  SEC. 48.  Section 1787 of the Health and Safety Code is amended to
read:
   1787.  (a) All continuing care contracts shall be in writing and
shall contain all the information required by Section 1788.
   (b) All continuing care contract forms, including all addenda,
exhibits, and any other related documents, incorporated therein, as
well as any modification to these items, shall be approved by the
department prior to their use.
   (c) The department shall approve continuing care contract forms
that comply with this chapter.  The requirements of this chapter and
Chapter 3.2 (commencing with Section 1569) shall be the bases for
approval by the department.  To the extent that this chapter
conflicts with Chapter 3.2 (commencing with Section 1569), this
chapter shall prevail.
   (d) A continuing care contract approved by the department shall
constitute the full and complete agreement between the parties.
   (e) More than one continuing care contract form may be used by a
provider if multiple program options are available.
   (f) All text in continuing care contract forms shall be printed in
at least 10-point typeface.
   (g) A clearly legible copy of the continuing care contract,
executed by each provider named on the provisional certificate of
authority or the certificate of authority, the resident, and any
transferor, shall be furnished with all required or included
attachments to the resident at the time the continuing care contract
is executed.  A copy shall also be furnished within 10 calendar days
to any transferor who is not a resident.
   (h) The provider shall require a written acknowledgment from the
resident (and any transferor who is not a resident) that the executed
copy of the continuing care contract and attachments have been
received.
   (i) The continuing care contract shall be an admissions agreement
for purposes of the residential care facility for the elderly and
long-term health care facility requirements and shall state the
resident's entitlement to receive these levels of care.  The
continuing care contract may state the entitlement for skilled
nursing care in accordance with the provisions of law governing
admissions to long-term health care facilities in effect at the time
of admission to the skilled nursing facility.  The parties may agree
to the terms of nursing facility admission at the time the continuing
care contract is executed, or the provider may present an exemplar
of the then-current nursing facility admission agreement and require
the resident to execute the form of agreement in effect at the time
of admission to the nursing facility.  The terms shall include the
nursing fee, or the method of determining the fee, at the time of the
execution of the continuing care contract, the services included in
and excluded from the fee, the grounds for transfers and discharges,
and any other terms required to be included under applicable law.
   (j) Only the skilled nursing admission agreement sections of
continuing care contracts which cover long-term health care facility
services are subject to Chapter 3.95 (commencing with Section
1599.60).  The provider shall use a skilled nursing admission nursing
agreement that complies with the requirements of Chapter 3.95
(commencing with Section 1599.85).
  SEC. 49.  Section 1788 of the Health and Safety Code is amended to
read:
   1788.  (a) Any continuing care contracts shall contain all of the
following:
   (1) The legal name and address of each provider.
   (2) The name and address of the continuing care retirement
community.
   (3) The resident's name and the identity of the unit the resident
will occupy.
   (4) If there is a transferor other than the resident, the
transferor shall be a party to the contract and the transferor's name
and address shall be specified.
   (5) If the provider has used the name of any charitable or
religious or nonprofit organization in its title before January 1,
1979, and continues to use that name, and that organization is not
responsible for the financial and contractual obligations of the
provider or the obligations specified in the continuing care
contract, the provider shall include in every continuing care
contract a conspicuous statement which clearly informs the resident
that the organization is not financially responsible.
   (6) The date the continuing care contract is signed by the
resident and, where applicable, any other transferor.
   (7) The duration of the continuing care contract.
   (8) A list of the services that will be made available to the
resident as required to provide the appropriate level of care.  The
list of services shall include the services required as a condition
for licensure as a residential care facility for the elderly,
including all of the following:
   (A) Regular observation of the resident's health status to ensure
that his or her dietary needs, social needs, and needs for special
services are satisfied.
   (B) Safe and healthful living accommodations, including
housekeeping services and utilities.
   (C) Maintenance of house rules for the protection of residents.
   (D) A planned activities program, which includes social and
recreational activities appropriate to the interests and capabilities
of the resident.
   (E) Three balanced, nutritious meals and snacks made available
daily, including special diets prescribed by a physician as a medical
necessity.
   (F) Assisted living services.
   (G) Assistance with taking medications.
   (H) Central storing and distribution of medications.
   (I) Arrangements to meet health needs, including arranging
transportation.
   (9) An itemization of the services that are included in the
monthly fee and the services that are available at an extra charge.
The provider shall attach a current fee schedule to the continuing
care contract.
   (10) The procedures and conditions under which residents may be
voluntarily and involuntarily transferred from their designated
living units.  The transfer procedures, at a minimum, shall include
provisions addressing all of the following circumstances under which
transfer may be authorized:
   (A) When, in the opinion of the continuing care retirement
community management, a physician, appropriate specialist, or
licensing official in consultation with the resident and appropriate
representative, if any, any of the following conditions exists:
   (i) The resident is nonambulatory.  The definition of
"nonambulatory," as provided in Section 13131, shall either be stated
in full in the continuing care contract or be cited.  If Section
13131 is                                          cited, a copy of
the statute shall be made available to the resident, either as an
attachment to the continuing care contract or by specifying that it
will be provided upon request.  If a nonambulatory resident occupies
a room that has a fire clearance for nonambulatory residence,
transfer shall not be necessary.
   (ii) The resident develops a physical or mental condition that
endangers the health, safety, or well-being of the resident or
another person, or causes an unreasonable and ongoing disturbance at
the continuing care retirement community.
   (iii) The resident's condition or needs require the resident's
transfer to an assisted living care unit or skilled nursing facility
for more efficient care or to protect the health of other residents,
or because the level of care required by the resident exceeds that
which may be lawfully provided in the living unit.
   (iv) The resident's condition or needs require the resident's
transfer to a nursing facility, hospital, or other facility, and the
provider has no facilities available to provide that level of care.
   (B) Transfer of a second resident when a shared accommodation
arrangement is terminated.
   (C) Transfer is requested or required, by the provider or the
resident, for any other reason.
   (11) Provisions describing any changes in the resident's monthly
fee and any changes in the entrance fee refund payable to the
resident that will occur if the resident transfers from any unit.
   (12) The provider's continuing obligations if any, in the event a
resident is transferred from the continuing care retirement community
to another facility.
   (13) The provider's obligations, if any, to resume care upon the
resident's return after a transfer from the continuing care
retirement community.
   (14) The provider's obligations to provide services to the
resident while the resident is absent from the continuing care
retirement community.
   (15) The conditions under which the resident must permanently
release his or her living unit.
   (16) If real or personal properties are transferred in lieu of
cash, a statement specifying each item's value at the time of
transfer, and how the value was ascertained.
   (A) An itemized receipt which includes the information described
above is acceptable if incorporated as a part of the continuing care
contract.
   (B) When real property is or will be transferred, the continuing
care contract shall include a statement that the deed or other
instrument of conveyance shall specify that the real property is
conveyed pursuant to a continuing care contract and may be subject to
rescission by the transferor within 90 days from the date that the
resident first occupies the residential unit.
   (C) The failure to comply with paragraph (16) shall not affect the
validity of title to real property transferred pursuant to this
chapter.
   (17) The amount of the entrance fee.
   (18) In the event two parties have jointly paid the entrance fee
or other payment which allows them to occupy the unit, the continuing
care contract shall describe how any refund of entrance fees is
allocated.
   (19) The amount of any processing fee.
   (20) The amount of any monthly care fee.
   (21) For continuing care contracts that require a monthly care fee
or other periodic payment, the continuing care contract shall
include the following:
   (A) A statement that the occupancy and use of the accommodations
by the resident is contingent upon the regular payment of the fee.
   (B) The regular rate of payment agreed upon (per day, week, or
month).
   (C) A provision specifying whether payment will be made in advance
or after services have been provided.
   (D) A provision specifying the provider will adjust monthly care
fees for the resident's support, maintenance, board, or lodging, when
a resident requires medical attention while away from the continuing
care retirement community.
   (E) A provision specifying whether a credit or allowance will be
given to a resident who is absent from the continuing care retirement
community or from meals.  This provision shall also state, when
applicable, that the credit may be permitted at the discretion or by
special permission of the provider.
   (22) All continuing care contracts that include monthly care fees
shall address changes in monthly care fees by including either of the
following provisions:
   (A) For prepaid continuing care contracts, which include monthly
care fees, one of the following methods:
   (i) Fees shall not be subject to change during the lifetime of the
agreement.
   (ii) Fees shall not be increased by more than a specified number
of dollars in any one year and not more than a specified number of
dollars during the lifetime of the agreement.
   (iii) Fees shall not be increased in excess of a specified
percentage over the preceding year and not more than a specified
percentage during the lifetime of the agreement.
   (B) For monthly fee continuing care contracts, except prepaid
contracts, changes in monthly care fees shall be based on projected
costs, prior year per capita costs, and economic indicators.
   (23) A provision requiring that the provider give written notice
to the resident at least 30 days in advance of any change in the
resident's monthly care fees or in the price or scope of any
component of care or other services.
   (24) A provision indicating whether the resident's rights under
the continuing care contract include any proprietary interests in the
assets of the provider or in the continuing care retirement
community, or both.
   (25) If the continuing care retirement community property is
encumbered by a security interest that is senior to any claims the
residents may have to enforce continuing care contracts, a provision
shall advise the residents that any claims they may have under the
continuing care contract are subordinate to the rights of the secured
lender.  For equity projects, the continuing care contract shall
specify the type and extent of the equity interest and whether any
entity holds a security interest.
   (26) Notice that the living units are part of a continuing care
retirement community that is licensed as a residential care facility
for the elderly and, as a result, any duly authorized agent of the
department may, upon proper identification and upon stating the
purpose of his or her visit, enter and inspect the entire premises at
any time, without advance notice.
   (27) A conspicuous statement, in at least 10-point boldface type
in immediate proximity to the space reserved for the signatures of
the resident and, if applicable, the transferor, that provides as
follows:  "You, the resident or transferor, may cancel the
transaction without cause at any time within 90 days from the date
you first occupy your living unit.  See the attached notice of
cancellation form for an explanation of this right."
   (28) Notice that during the cancellation period, the continuing
care contract may be canceled upon 30 days' written notice by the
provider without cause, or that the provider waives this right.
   (29) The terms and conditions under which the continuing care
contract may be terminated after the cancellation period by either
party, including any health or financial conditions.
   (30) A statement that, after the cancellation period, a provider
may unilaterally terminate the continuing care contract only if the
provider has good and sufficient cause.
   (A) Any continuing care contract containing a clause that provides
for a continuing care contract to be terminated for "just cause,"
"good cause," or other similar provision, shall also include a
provision that none of the following activities by the resident, or
on behalf of the resident, constitutes "just cause," "good cause," or
otherwise activates the termination provision:
   (i) Filing or lodging a formal complaint with the department or
other appropriate authority.
   (ii) Participation in an organization or affiliation of residents,
or other similar lawful activity.
   (B) The provision required by this paragraph shall also state that
the provider shall not discriminate or retaliate in any manner
against any resident of a continuing care retirement community for
contacting the department, or any other state, county, or city
agency, or any elected or appointed government official to file a
complaint or for any other reason, or for participation in a
residents' organization or association.
   (C) Nothing in this paragraph diminishes the provider's ability to
terminate the continuing care contract for good and sufficient
cause.
   (31) A statement that at least 90 days' written notice to the
resident is required for a unilateral termination of the continuing
care contract by the provider.
   (32) A statement concerning the length of notice that a resident
is required to give the provider to voluntarily terminate the
continuing care contract after the cancellation period.
   (33) The policy or terms for refunding any portion of the entrance
fee, in the event of cancellation, termination, or death.  Every
continuing care contract that provides for a refund of all or a part
of the entrance fee shall also  do all of the following:
   (A) Specify the amount, if any, the resident has paid or will pay
for upgrades, special features, or modifications to the resident's
unit.
   (B) State that if the continuing care contract is cancelled or
terminated by the provider, the provider shall do both of the
following:
   (i) Amortize the specified amount at the same rate as the resident'
s entrance fee.
   (ii) Refund the unamortized balance to the resident at the same
time the provider pays the resident's entrance fee refund.
   (34) The following notice at the bottom of the signatory page:


                             "NOTICE"                  (date)

   This is a continuing care contract as defined by paragraph (8) of
subdivision (c), or subdivision (l) of Section 1771 of the California
Health and Safety Code.  This continuing care contract form has been
approved by the State Department of Social Services as required by
subdivision (b) of Section 1787 of the California Health and Safety
Code.  The basis for this approval was a determination that (provider
name) has submitted a contract that complies with the minimum
statutory requirements applicable to continuing care contracts.  The
department does not approve or disapprove any of the financial or
health care coverage provisions in this contract.  Approval by the
department is NOT a guaranty of performance or an endorsement of any
continuing care contract provisions.  Prospective transferors and
residents are strongly encouraged to carefully consider the benefits
and risks of this continuing care contract and to seek financial and
legal advice before signing.

   (35) The provider may not attempt to absolve itself in the
continuing care contract from liability for its negligence by any
statement to that effect, and shall include the following statement
in the contract:  "Nothing in this continuing care contract limits
either the provider's obligation to provide adequate care and
supervision for the resident or any liability on the part of the
provider which may result from the provider's failure to provide this
care and supervision."
   (b) A life care contract shall also provide that:
   (1) All levels of care, including acute care and physicians' and
surgeons' services will be provided to a resident.
   (2) Care will be provided for the duration of the resident's life
unless the life care contract is canceled or terminated by the
provider during the cancellation period or after the cancellation
period for good cause.
   (3) A comprehensive continuum of care will be provided to the
resident, including skilled nursing, in a facility under the
ownership and supervision of the provider on, or adjacent to, the
continuing care retirement community premises.
   (4) Monthly care fees will not be changed based on the resident's
level of care or service.
   (5) A resident who becomes financially unable to pay his or her
monthly care fees shall be subsidized provided the resident's
financial need does not arise from action by the resident to divest
the resident of his or her assets.
   (c) Continuing care contracts may include provisions that do any
of the following:
   (1) Subsidize a resident who becomes financially unable to pay for
his or her monthly care fees at some future date.  If a continuing
care contract provides for subsidizing a resident, it may also
provide for any of the following:
   (A) The resident shall apply for any public assistance or other
aid for which he or she is eligible and that the provider may apply
for assistance on behalf of the resident.
   (B) The provider's decision shall be final and conclusive
regarding any adjustments to be made or any action to be taken
regarding any charitable consideration extended to any of its
residents.
   (C) The provider is entitled to payment for the actual costs of
care out of any property acquired by the resident subsequent to any
adjustment extended to the resident under paragraph (1), or from any
other property of the resident which the resident failed to disclose.

   (D) The provider may pay the monthly premium of the resident's
health insurance coverage under Medicare to ensure that those
payments will be made.
   (E) The provider may receive an assignment from the resident of
the right to apply for and to receive the benefits, for and on behalf
of the resident.
   (F) The provider is not responsible for the costs of furnishing
the resident with any services, supplies, and medication, when
reimbursement is reasonably available from any governmental agency,
or any private insurance.
   (G) Any refund due to the resident at the termination of the
continuing care contract may be offset by any prior subsidy to the
resident by the provider.
   (2) Limit responsibility for costs associated with the treatment
or medication of an ailment or illness existing prior to the date of
admission.  In these cases, the medical or surgical exceptions, as
disclosed by the medical entrance examination, shall be listed in the
continuing care contract or in a medical report attached to and made
a part of the continuing care contract.
   (3) Identify legal remedies which may be available to the provider
if the resident makes any material misrepresentation or omission
pertaining to the resident's assets or health.
   (4) Restrict transfer or assignments of the resident's rights and
privileges under a continuing care contract due to the personal
nature of the continuing care contract.
   (5) Protect the provider's ability to waive a resident's breach of
the terms or provisions of the continuing care contract in specific
instances without relinquishing its right to insist upon full
compliance by the resident with all terms or provisions in the
contract.
   (6) Provide that the resident shall reimburse the provider for any
uninsured loss or damage to the resident's unit, beyond normal wear
and tear, resulting from the resident's carelessness or negligence.
   (7) Provide that the resident agrees to observe the off-limit
areas of the continuing care retirement community designated by the
provider for safety reasons.  The provider may not include any
provision in a continuing care contract that absolves the provider
from liability for its negligence.
   (8) Provide for the subrogation to the provider of the resident's
rights in the case of injury to a resident caused by the acts or
omissions of a third party, or for the assignment of the resident's
recovery or benefits in this case to the provider, to the extent of
the value of the goods and services furnished by the provider to or
on behalf of the resident as a result of the injury.
   (9) Provide for a lien on any judgment, settlement, or recovery
for any additional expense incurred by the provider in caring for the
resident as a result of injury.
   (10) Require the resident's cooperation and assistance in the
diligent prosecution of any claim or action against any third party.

   (11) Provide for the appointment of a conservator or guardian by a
court with jurisdiction in the event a resident becomes unable to
handle his or her personal or financial affairs.
   (12) Allow a provider, whose property is tax exempt, to charge the
resident on a pro rata basis property taxes, or in-lieu taxes, that
the provider is required to pay.
   (13) Make any other provision approved by the department.
   (d) A copy of the resident's rights as described in Section 1771.7
shall be attached to every continuing care contract.
   (e) A copy of the current audited financial statement of the
provider shall be attached to every continuing care contract.  For a
provider whose current audited financial statement does not
accurately reflect the financial ability of the provider to fulfill
the continuing care contract obligations, the financial statement
attached to the continuing care contract shall include all of the
following:
   (1) A disclosure that the reserve requirement has not yet been
determined or met, and that entrance fees will not be held in escrow.

   (2) A disclosure that the ability to provide the services promised
in the continuing care contract will depend on successful compliance
with the approved financial plan.
   (3) A copy of the approved financial plan for meeting the reserve
requirements.
   (4) Any other supplemental statements or attachments necessary to
accurately represent the provider's financial ability to fulfill its
continuing care contract obligations.
   (f) A schedule of the average monthly care fees charged to
residents for each type of residential living unit for each of the
five years preceding execution of the continuing care contract shall
be attached to every continuing care contract.  The provider shall
update this schedule annually at the end of each fiscal year.  If the
continuing care retirement community has not been in existence for
five years, the information shall be provided for each of the years
the continuing care retirement community has been in existence.
   (g) If any continuing care contract provides for a health
insurance policy for the benefit of the resident, the provider shall
attach to the continuing care contract a binder complying with
Sections 382 and 382.5 of the Insurance Code.
   (h) The provider shall attach to every continuing care contract a
completed form in duplicate, captioned "Notice of Cancellation."  The
notice shall be easily detachable, and shall contain, in at least
10-point boldface type, the following statement:


                "NOTICE OF CANCELLATION"               (date)


     Your first date of occupancy under this contract is: ___________


   "You may cancel this transaction, without any penalty within 90
calendar days from the above date.
   If you cancel, any property transferred, any payments made by you
under the contract, and any negotiable instrument executed by you
will be returned within 14 calendar days after making possession of
the living unit available to the provider.  Any security interest
arising out of the transaction will be canceled.
   If you cancel, you are obligated to pay a reasonable processing
fee to cover costs and to pay for the reasonable value of the
services received by you from the provider up to the date you
canceled or made available to the provider the possession of any
living unit delivered to you under this contract, whichever is later.

   If you cancel, you must return possession of any living unit
delivered to you under this contract to the provider in substantially
the same condition as when you took possession.
   Possession of the living unit must be made available to the
provider within 20 calendar days of your notice of cancellation.  If
you fail to make the possession of any living unit available to the
provider, then you remain liable for performance of all obligations
under the contract.
   To cancel this transaction, mail or deliver a signed and dated
copy of this cancellation notice, or any other written notice, or
send a telegram


    to
_______________________________________________________________
                           (Name of provider)
    at
_______________________________________________________________
                 (Address of provider's place of business)
    not later than midnight of ________________ (date).

    I hereby cancel this
    transaction
______________________________________

                                           (Resident or
                                      Transferor's signature)"

  SEC. 50.  Section 1788.2 of the Health and Safety Code is amended
to read:
   1788.2.  (a) A continuing care contract may be canceled without
cause by written notice from either party within 90 days from the
date of the resident's initial occupancy.
   (b) For all continuing care contracts, death of the resident
before or during the cancellation period shall constitute a
cancellation of the continuing care contract under subdivision (a),
unless the continuing care contract includes specific provisions
otherwise.
   (c) The cancellation period and the associated refund obligations
shall apply as follows:
   (1) To all executed continuing care contracts regarding a unit in
a continuing care retirement community that is not an equity
continuing care retirement community.
   (2) To continuing care contracts executed in conjunction with a
purchase of an equity interest from a provider but not to continuing
care contracts executed in conjunction with sales of an equity
interest by one resident to another.
   (d) The following fees may be charged before or during the 90-day
cancellation period:
   (1) If possession of the living unit in a continuing care
retirement community that is not an equity continuing care retirement
community is returned to the provider in substantially the same
condition as when received, the resident's only obligations shall be
to pay a reasonable fee to cover costs and to pay the reasonable
value of services rendered pursuant to the canceled continuing care
contract.
   (2) Equity project providers may impose a resale fee on sellers.
For contracts entered into after January 1, 1996, upon the
cancellation of a continuing care contract executed in conjunction
with the purchase of an equity interest from the provider, the
provider may charge a resale fee not to exceed the excess of the
gross resale price of the equity interest over the purchase price
paid by the resident or on behalf of the resident for the interest.
   (e) No resale fee shall exceed the sum of 10 percent of either the
original or resale price of the equity interest and 100 percent of
the excess if any, of the gross resale price of the equity interest
over the purchase price paid by the resident or on behalf of the
resident for the interest if either of the following applies:
   (1) The continuing care contract involved the purchase of an
equity interest from the provider and is terminated after the
cancellation period.
   (2) The continuing care contract involved the purchase of an
equity interest from another resident and is terminated at any time.

   (f) For purposes of this section, "gross resale price" means the
resale price before any deductions for resale fees, transfer taxes,
real estate commissions, periodic fees, late charges, interest,
escrow fees, or any other fees incidental to the sale of real
property.
   (g) This section may not be construed to limit the provider's
ability to withhold delinquent periodic fees, late charges, accrued
interest, or assessments from the sale proceeds, as provided by the
continuing care contract or the real estate documents governing the
equity continuing care retirement community.
  SEC. 51.  Section 1788.4 of the Health and Safety Code is amended
to read:
   1788.4.  (a) During the cancellation period, the provider shall
pay all refunds owed to a resident within 14 calendar days after a
resident makes possession of the living unit available to the
provider.
   (b) After the cancellation period, any refunds due to a resident
under a continuing care contract shall be paid within 14 calendar
days after a resident makes possession of the living unit available
to the provider or 90 calendar days after death or receipt of notice
of termination, whichever is later.
   (c) In nonequity projects, if the continuing care contract is
canceled by either party during the cancellation period or terminated
by the provider after the cancellation period, the resident shall be
refunded the difference between the total amount of entrance,
monthly, and optional fees paid and the amount used for care of the
resident.
   (d) If a resident has paid additional amounts for upgrades,
special features, or modifications to the living unit and the
provider terminates the resident's continuing care contract, the
provider shall amortize those additional amounts at the same rate as
the entrance fee and shall refund the unamortized balance to the
resident.
   (e) A lump-sum payment to a resident after termination of a
continuing care contract that is conditioned upon resale of a unit
shall not be considered to be a refund and may not be characterized
or advertised as a refund.  The lump sum payment shall be paid to the
resident within 14 calendar days after resale of the unit.
  SEC. 52.  Section 1789 of the Health and Safety Code is amended to
read:
   1789.  (a) A provider shall notify the department and obtain its
approval before making any changes to any of the following:  its
name; its business structure or form of doing business; the overall
management of its continuing care retirement community; or the terms
of its financing.
   (b) The provider shall give written notice of proposed changes to
the department at least 60 calendar days in advance of making the
changes described in this section.
   (c) This notice requirement does not apply to routine facility
staff changes.
   (d) Within 10 calendar days of submitting notification to the
department of any proposed changes under subdivision (a), the
provider shall notify the resident association of the proposed
changes in the manner required by subdivision (e) of Section 1779.
  SEC. 53.  Section 1789.1 is added to the Health and Safety Code, to
read:
   1789.1.  (a) Before executing a deposit agreement or continuing
care agreement, or receiving any payment from a depositor or
prospective resident, a provider shall deliver to the other parties
in the deposit or continuing care agreement a disclosure statement in
the form prescribed                                           by the
department.
   (b) The department shall issue a disclosure statement form that
shall generally require disclosure, at a minimum, of the following
information:
   (1) General information regarding the provider and the continuing
care retirement community, including at a minimum all of the
following:
   (A) The continuing care retirement community's name, address, and
telephone number.
   (B) The type of ownership, names of the continuing care retirement
community's owner and operator, the names of any affiliated
facilities, and any direct religious affiliation.
   (C) Whether accredited and by what organization.
   (D) The year the continuing care retirement community opened and
the distance to the nearest shopping center and hospital.
   (E) Whether the continuing care retirement community offers life
care contracts or continuing care contracts, and whether the
continuing care retirement community is single story or multistory.
   (F) The number of the continuing care retirement community's
studio units, one bedroom units, two bedroom units, cottages or
houses, assisted living beds, and skilled nursing beds.
   (G) The continuing care retirement community's percentage
occupancy at the provider's most recent fiscal yearend.
   (H) The form of contracts offered, the range of entrance fees, the
percentages of a resident's entrance fees that may be refunded, and
the health care benefits included in contract.
   (I) Any age and insurance requirements for admission.
   (J) A listing of common area amenities and other services included
with the monthly service fee, and a listing of those amenities and
services that are available for an additional charge.
   (K) The number of meals each day included in the monthly service
fee, the number of meals available for an extra charge, the frequency
of housekeeping services, and additional cost, if any , for
housekeeping services.
   (2) Income from operations during the most recent five years for
which audited financial statements have been completed, including all
of the following:
   (A) Operating income (excluding amortization of entrance fee
income).
   (B) Operating expense (excluding depreciation, amortization, and
interest).
   (C) Net income from operations.
   (D) Interest expense.
   (E) Unrestricted contributions.
   (F) Nonoperating income or expense, excluding extraordinary items.

   (G) Net income or loss before entrance fees.
   (H) Net cash-flow from entrance fees, that is the total deposits
less refunds.
   (3) The name of the lender, outstanding balance, interest rate,
date of origination, date of maturity, and amortization period for
all secured debt.
   (4) Financial ratios for each of the three most recent years for
which audited financial statements have been prepared, including all
of the following:  debt-to-asset ratio, operating ratio, debt service
coverage ratio, and days cash-on-hand.  The formulas for each ratio
shall be determined by the department after consultation with the
Continuing Care Advisory Committee.
   (5) The average monthly service fees charged during the most
recent five years, and the percentage changes in the average from
year to year, for each of the following:  studio units, one bedroom
units, two bedroom units, cottages and houses, assisted living units,
and skilled nursing units.
   (6) Comments from the provider explaining any of the information
included in the disclosure form.
   (c) Each provider shall update its disclosure statement at least
annually when it completes its annual audited financial statements.
Each provider shall file its updated version of the disclosure
statement with the department not later than the final filing date
for its annual report.
   (d) The form prescribed by the department under this section shall
be used by providers to comply with the requirements of this
section.
  SEC. 54.  Section 1789.2 of the Health and Safety Code is amended
to read:
   1789.2.  (a) A provider shall provide the department with written
notice at least 90 calendar days prior to closing any transaction
that results in an encumbrance or lien on a continuing care
retirement community property or its revenues.
   (b) The written notice required by this section shall include all
of the following:
   (1) A description of the terms and amount of the proposed
transaction.
   (2) An analysis of the sources of funds for repayment of principal
and interest.
   (3) An analysis of the impact of the proposed transaction on
monthly care fees.
   (4) An analysis of the impact that the proposed encumbrance would
have on assets available for liquid reserves required by Section
1792, and refund reserves required by Section 1792.6.
   (c) Within seven calendar days of receipt of notice of proposed
changes, the department shall acknowledge receipt of the notice in
writing.
   (d) Within 30 calendar days following its receipt of the notice,
the department shall inform the provider in writing whether
additional materials are required to evaluate the transaction.
   (e) Within 90 calendar days following its receipt of additional
materials, the department shall inform the provider of its approval
or denial of the proposed transaction.
   (f) Providers shall not execute the proposed financial transaction
for which notice has been given pursuant to subdivision (a) without
the department's written authorization unless either the 30-day
response period or the 90 calendar day period for the department's
review of the provider's request has expired without any response by
the department.
   (g) If the department determines that the proposed financial
transaction will materially increase monthly care fees or impair the
provider's ability to maintain required reserves, the department may:

   (1) Refuse to approve the transaction.
   (2) Record a notice of lien on the provider's property pursuant to
Section 1793.15 after notifying the provider and giving the provider
an opportunity to withdraw the planned transaction.
   (3) Take both actions and any other action that it determines is
necessary to protect the best interests of the residents.
   (h) Within 10 calendar days of submitting notification to the
department of any proposed encumbrance to the community property, the
provider shall notify the resident governing body or association of
the proposed encumbrance in the manner required by subdivision (e) of
Section 1779.
  SEC. 55.  Section 1789.4 of the Health and Safety Code is amended
to read:
   1789.4.  (a) A provider for a continuing care retirement community
shall obtain approval from the department before consummating any
sale or transfer of the continuing care retirement community or any
interest in that community, other than sale of an equity interest in
a unit to a resident or other transferor.
   (b) The provider shall provide written notice to the department at
least 120 calendar days prior to consummating the proposed
transaction.
   (c) The notice required by this section shall include all of the
following:
   (1) The identity of the purchaser.
   (2) A description of the terms of the transfer or sale, including
the sales price.
   (3) A plan for ensuring performance of the existing continuing
care contract obligations.
   (d) The provider shall give written notice to all continuing care
contract residents and depositors 120 calendar days prior to the sale
or transfer.  The notice shall do all of the following:
   (1) Describe the parties.
   (2) Describe the proposed sale or transfer.
   (3) Describe the arrangements for fulfilling continuing care
contract obligations.
   (4) Describe options available to any depositor or resident who
does not wish to have his or her contract assumed by a new provider.

   (5) Include an acknowledgment of receipt of the notice to be
signed by the resident.
   (e) Unless a new provider assumes all of the continuing care
obligations of the selling provider at the close of the sale or
transfer, the selling provider shall set up a trust fund or secure a
performance bond to ensure the fulfillment of all its continuing care
contract obligations.
   (f) The purchaser shall make applications for, and obtain, the
appropriate licenses and a certificate of authority before executing
any continuing care contracts or assuming the selling provider's
continuing care contract obligations.
  SEC. 56.  Section 1789.6 of the Health and Safety Code is amended
to read:
   1789.6.  A provider shall record with the county recorder a
"Notice of Statutory Limitation on Transfer" for each community as
required by subdivision (aa) of Section 1779.4 and Section 1786.
  SEC. 57.  Section 1789.8 of the Health and Safety Code is amended
to read:
   1789.8.  Each provider shall obtain and maintain in effect
insurance or a fidelity bond for each agent or employee, who, in the
course of his or her agency or employment, has access to any
substantial amount of funds.  This requirement is separate from the
bonding requirements of residential care facility for the elderly
regulations.
  SEC. 57.1.  Section 1792 of the Health and Safety Code is repealed.

  SEC. 57.15.  Section 1792 is added to the Health and Safety Code,
to read:
   1792.  (a) A provider shall maintain at all times qualifying
assets as a liquid reserve in an amount that equals or exceeds the
sum of the following:
   (1) The amount the provider is required to hold as a debt service
reserve under Section 1792.3.
   (2) The amount the provider must hold as an operating expense
reserve under Section 1792.4.
   (b) The liquid reserve requirement described in this section is
satisfied when a provider holds qualifying assets in the amount
required.  Except as may be required under subdivision (d), a
provider is not required to set aside, deposit into an escrow, or
otherwise restrict the assets it holds as its liquid reserve.
   (c) A provider shall not allow the amount it holds as its liquid
reserve to fall below the amount required by this section.  In the
event the amount of a provider's liquid reserve is insufficient, the
provider shall prudently eliminate the deficiency by increasing its
assets qualifying under Section 1792.2.
   (d) The department may increase the amount a provider is required
to hold as its liquid reserve or require that a provider immediately
place its liquid reserve into an escrow account meeting the
requirements of Section 1781 if the department has reason to believe
the provider is any of the following:
   (1) Insolvent.
   (2) In imminent danger of becoming insolvent.
   (3) In a financially unsound or unsafe condition.
   (4) In a condition such that it may otherwise be unable to fully
perform its obligations pursuant to continuing care contracts.
  SEC. 57.2.  Section 1792.1 is added to the Health and Safety Code,
to read:
   1792.1.  (a) For providers that have voluntarily and permanently
discontinued entering into continuing care contracts, the department
may allow a reduced liquid reserve amount if the department finds
that the reduction is consistent with the financial protections
imposed by this article.  The reduced liquid reserve amount shall be
based upon the percentage of residents at the continuing care
retirement community who have continuing care contracts.
   (b) For providers holding a certificate of authority as of January
1, 2001, the liquid reserve requirement described in Section 1792
shall be phased in over the 24-month period following January 1,
2001.  A provider holding a certificate of authority shall comply
with the liquid reserve requirements if all of the following apply:
   (1) During the first 12 months following January 1, 2001, the
provider holds as its liquid reserve, qualifying assets that equal or
exceed 25 percent of the provider's debt reserve obligation; plus
qualifying assets that equal or exceed 25 percent of the provider's
operating expense reserve obligation.
   (2) During the 13th through 24th months following January 1, 2001,
the provider holds as its liquid reserve, qualifying assets that
equal or exceed 50 percent of the provider's debt reserve obligation;
plus qualifying assets that equal or exceed 50 percent of the
provider's operating expense reserve obligation.
   (3) After the 24 months following January 1, 2001, the provider
holds as its liquid reserve qualifying assets in the amount required
by Section 1792.
   (c) Providers who are unable to satisfy the debt service reserve
or operating expense reserve requirements during the 24-month period
described in subdivision (b) may apply to the department for an
extension of the time to comply with those reserve requirements.  The
department shall grant a one-year extension request to a provider
upon its showing that an extension is necessary and consistent with
protecting the financial soundness of the provider.
  SEC. 57.21.  Section 1792.2 of the Health and Safety Code is
repealed.
  SEC. 57.25.  Section 1792.2 is added to the Health and Safety Code,
to read:
   1792.2.  (a) A provider shall satisfy its liquid reserve
obligation with qualifying assets.  Qualifying assets are:
   (1) Cash.
   (2) Cash equivalents as defined in paragraph (4) of subdivision
(c) of Section 1771.
   (3) Investment securities, as defined in paragraph (2) of
subdivision (i) of Section 1771.
   (4) Equity securities, including mutual funds, as defined in
paragraph (7) of subdivision (e) of Section 1771.
   (5) Lines of credit and letters of credit that meet the
requirements of this paragraph.  The line of credit or letter of
credit shall be issued by a state or federally chartered financial
institution approved by the department or whose long-term debt is
rated in the top three long-term debt rating categories by either
Moody's Investors Service, Standard and Poor's Corporation, or a
recognized securities rating agency acceptable to the department.
The line of credit or letter of credit shall obligate the financial
institution to furnish credit to the provider.
   (A) The terms of the line of credit or letter of credit shall at a
minimum provide both of the following:
   (i) The department's approval shall be obtained by the provider
and communicated in writing to the financial institution before any
modification.
   (ii) The financial institution shall fund the line of credit or
letter of credit and pay the proceeds to the provider no later than
four business days following written instructions from the department
that, in the sole judgment of the department, funding of the
provider's minimum liquid reserve is required.
   (B) The provider shall provide written notice to the department at
least 14 days before the expiration of the line of credit or letter
of credit if the term has not been extended or renewed by that time.
The notice shall describe the qualifying assets the provider will
use to satisfy the liquid reserve requirement when the line of credit
or letter of credit expires.
   (C) A provider may satisfy all or a portion of its liquid reserve
requirement with the available and unused portion of a qualifying
line of credit or letter of credit.
   (6) For purposes of satisfying all or a portion of a provider's
debt service reserve requirement described in Section 1792.3,
restricted assets that are segregated or held in a separate account
or escrow as a debt service reserve under the terms of the provider's
long-term debt instruments are qualifying assets, subject to all of
the following conditions:
   (A) The assets are restricted by the debt instrument so that they
may be used only to pay principal, interest, and credit enhancement
premiums.
   (B) The provider furnishes to the department a copy of the
agreement under which the restricted assets are held and certifies
that it is a correct and complete copy.  The provider, escrow holder,
or other entity holding the assets must agree to provide to the
department any information the department may request concerning the
debt service reserve it holds.
   (C) The market value, or guaranteed value, if applicable, of the
restricted assets, up to the amount the provider must hold as a debt
reserve under Section 1792.3, will be included as part of the
provider's liquid reserve.
   (D) The restricted assets described in this paragraph will not
reduce or count towards the amount the provider must hold in its
liquid reserve for operating expenses.
   (7) For purposes of satisfying all or a portion of a provider's
operating expense reserve requirement described in Section 1792.4,
restricted assets that are segregated or held in a separate account
or escrow as a reserve for operating expenses, are qualifying assets
subject to all of the following conditions:
   (A) The governing instrument restricts the assets so that they may
be used only to pay operating costs when operating funds are
insufficient.
   (B) The provider furnishes to the department a copy of the
agreement under which the assets are held, certified by the provider
to be a correct and complete copy.  The provider, escrow holder, or
other entity holding the assets shall agree to provide to the
department any information the department may request concerning the
account.
   (C) The market value, or the guaranteed value, if applicable, of
the restricted assets, up to the amount the provider is required to
hold as an operating expense reserve under Section 1792.4, will be
included as part of the provider's liquid reserve.
   (D) The restricted assets described in this paragraph shall not
reduce or count towards the amount the provider is required to hold
in its liquid reserve for long-term debt.
   (b) Except as otherwise provided in this subdivision, the assets
held by the provider as its liquid reserve may not be subject to any
liens, charges, judgments, garnishments, or creditors' claims and may
not be hypothecated, pledged as collateral, or otherwise encumbered
in any manner.  A provider may encumber assets held in its liquid
reserve as part of a general security pledge of assets or similar
collateralization that is part of the provider's long-term capital
debt covenants and is included in the provider's long-term debt
indenture or similar instrument.
  SEC. 57.3.  Section 1792.3 is added to the Health and Safety Code,
to read:
   1792.3.  (a) Each provider shall include in its liquid reserve a
reserve for its long-term debt obligations in an amount equal to the
sum of all of the following:
   (1) All regular principal and interest payments, as well as credit
enhancement premiums, paid by the provider during the immediately
preceding fiscal year on account of any fully amortizing long-term
debt owed by the provider.  If a provider has incurred new long-term
debt during the immediately preceding fiscal year, the amount
required by this paragraph for that debt is 12 times the provider's
most recent monthly payment on the debt.
   (2) Facility rental or leasehold payments, and any related
payments such as lease insurance, paid by the provider during the
immediately preceding fiscal year.
   (3) All payments paid by the provider during the immediately
preceding fiscal year on account of any debt that provides for a
balloon payment.  If the balloon payment debt was incurred within the
immediately preceding fiscal year, the amount required by this
paragraph for that debt is 12 times the provider's most recent
monthly payment on the debt made during the fiscal year.
   (b) If any balloon payment debt matures within the next 24 months,
the provider shall submit with its annual report a plan for
refinancing the debt or repaying the debt with existing assets.
   (c) When principal and interest payments on long-term debt are
paid to a trust whose beneficial interests are held by the residents,
the department may waive all or any portion of the debt service
reserve required by this section.  The department shall not waive any
debt service reserve requirement unless the department finds that
the waiver is consistent with the financial protections imposed by
this chapter.
  SEC. 57.31.  Section 1792.4 is added to the Health and Safety Code,
to read:
   1792.4.  (a) Each provider shall include in its liquid reserve a
reserve for its operating expenses in an amount that equals or
exceeds 45 days' net operating expenses.  For purposes of this
section:
   (1) Forty-five days net operating expenses shall be calculated by
dividing the provider's operating expenses during the immediately
preceding fiscal year by 365, and multiplying that quotient by 45.
   (2) "Net operating expenses" includes all expenses except the
following:
   (A) The interest and credit enhancement expenses factored into the
provider's calculation of its long-term debt reserve obligation
described in Section 1792.3.
   (B) Depreciation or amortization expenses.
   (C) An amount equal to the reimbursement paid to the provider
during the past 12 months for services to residents other than
residents holding continuing care contracts.
   (D) Extraordinary expenses that the department determines may be
excluded by the provider.  A provider shall apply in writing for a
determination by the department and shall provide supporting
documentation prepared in accordance with generally accepted
accounting principles.
   (b) A provider that has been in operation for less than 12 months
shall calculate its net operating expenses by using its actual
expenses for the months it has operated and, for the remaining
months, the projected net operating expense amounts it submitted to
the department as part of its application for a certificate of
authority.
  SEC. 57.35.  Section 1792.5 is added to the Health and Safety Code,
to read:
   1792.5.  (a) The provider shall compute its liquid reserve
requirement as of the end of the provider's most recent fiscal
yearend based on its audited financial statements for that period
and, at the time it files its annual report, shall file a form
acceptable to the department certifying all of the following:
   (1) The amount the provider is required to hold as a liquid
reserve, including the amounts required for the debt service reserve
and the operating expense reserve.
   (2) The qualifying assets, and their respective values, the
provider has designated for its debt service reserve and for its
operating expense reserve.
   (3) The amount of any deficiency or surplus for the provider's
debt service reserve and the provider's operating expense reserve.
   (b) The provider shall also complete the same form and file it
with the department within 45 days following the conclusion of each
quarter during the provider's fiscal year.  For each quarterly
report, the amount the provider is required to designate for its debt
reserve and operating expense reserve shall be based on the provider'
s audited financial statements for its most recently completed fiscal
year.
   (c) For the purpose of calculating the amount held by the provider
to satisfy its liquid reserve requirement, all qualifying assets
used to satisfy the liquid reserve requirements shall be valued at
their fair market value as of the end of the provider's most recent
quarter.  Restricted assets that have guaranteed values and are
designated as qualifying assets under paragraph (6) or (7) of
subdivision (a) of Section 1792.2 may be valued at their guaranteed
values.
  SEC. 57.36.  Section 1792.6 is added to the Health and Safety Code,
to read:
   1792.6.  (a) Any provider offering a refundable contract, or other
entity assuming responsibility for refundable contracts, shall
maintain a refund reserve in trust for the residents.  The amount of
the refund reserve shall be revised annually by the provider and the
provider shall submit its calculation of the refund reserve amount to
the department in conjunction with the annual report required by
Section 1790.  This reserve shall accumulate interest and earnings
and shall be invested in any of the following:
   (1) Qualifying assets as defined in Section 1792.2.
   (2) Real estate, subject to all of the following conditions:
   (A) To the extent approved by the department, the trust account
may invest up to 70 percent of the refund reserves in real estate
that is both used to provide care and housing for the holders of the
refundable continuing care contracts and is located on the same
campus where these continuing care contractholders reside.
   (B) Investments in real estate shall be limited to 50 percent of
the providers' net equity in the real estate.  The net equity shall
be the book value, assessed value, or current appraised value within
12 months prior to the end of the fiscal year, less any depreciation,
and encumbrances, all according to audited financial statements
acceptable to the department.
   (b) Each refund reserve trust shall be established at an
institution qualified to be an escrow agent.  The escrow agreement
between the provider and the institution shall be in writing and
include the terms and conditions described in this section.  The
escrow agreement shall be submitted to and approved by the department
before it becomes effective.
   (c) The amount to be held in the reserve shall be the total of the
amounts calculated with respect to each individual resident holding
a refundable contract as follows:
   (1) Determine the age in years and the portion of the entry fee
for the resident refundable for the seventh year of residency and
thereafter.
   (2) Determine life expectancy of that individual based on all of
the following rules:
   (A) The following life expectancy table shall be used in
connection with all continuing care contracts:


    Age     Females     Males           Age     Females     Males
     55      26.323    23.635            83      7.952      6.269
     56      25.526    22.863            84      7.438      5.854
     57      24.740    22.101            85      6.956      5.475
     58      23.964    21.350            86      6.494      5.124
     59      23.199    20.609            87      6.054      4.806
     60      22.446    19.880            88      5.613      4.513
     61      21.703    19.163            89      5.200      4.236
     62      20.972    18.457            90      4.838      3.957
     63      20.253    17.764            91      4.501      3.670
     64      19.545    17.083            92      4.175      3.388
     65      18.849    16.414            93      3.862      3.129
     66      18.165    15.759            94      3.579      2.903
     67      17.493    15.116            95      3.329      2.705
     68      16.832    14.486            96      3.109      2.533

           69      16.182    13.869            97      2.914
2.384
     70      15.553    13.268            98      2.741      2.254
     71      14.965    12.676            99      2.584      2.137
     72      14.367    12.073           100      2.433      2.026
     73      13.761    11.445           101      2.289      1.919
     74      13.189    10.830           102      2.152      1.818
     75      12.607    10.243           103      2.022      1.723
     76      12.011     9.673           104      1.899      1.637
     77      11.394     9.139           105      1.784      1.563
     78      10.779     8.641           106      1.679      1.510
     79      10.184     8.159           107      1.588      1.500
     80       9.620     7.672           108      1.522      1.500
     81       9.060     7.188           109      1.500      1.500
     82       8.501     6.719           110      1.500      1.500

   (B) If there is a couple, the life expectancy for the person with
the longer life expectancy shall be used.
   (C) The life expectancy table set forth in this paragraph shall be
used until expressly provided to the contrary through the amendment
of this section.
   (D) For residents over 110 years of age, 1.500 years shall be used
in computing life expectancy.
   (E) If a continuing care retirement community has contracted with
a resident under 55 years of age, the continuing care retirement
community shall provide the department with the methodology used to
determine that resident's life expectancy.
   (3) For that resident, use an interest rate of 6 percent or lower
to determine from compound interest tables the factor that, when
multiplied by one dollar ($1), represents the amount, at the time the
computation is made, that will grow at the assumed compound interest
rate to one dollar ($1) at the end of the period of the life
expectancy of the resident.
   (4) Multiply the refundable portion of the resident's entry fee
amount by the factor obtained in paragraph (3) to determine the
amount of reserve required to be maintained.
   (5) The sum of these amounts with respect to each resident shall
constitute the reserve for refundable contracts.
   (6) The reserve for refundable contracts shall be revised annually
as provided for in subdivision (a), using the interest rate, refund
obligation amount, and individual life expectancies current at that
time.
   (d) Withdrawals may be made from the trust to pay refunds when due
under the terms of the refundable entrance fee contracts and when
the balance in the trust exceeds the required refund reserve amount
determined in accordance with subdivision (c).
   (e) Deposits shall be made to the trust with respect to new
residents when the entrance fee is received and in the amount
determined with respect to that resident in accordance with
subdivision (c).
   (f) Additional deposits shall be made to the trust fund within 30
days of any annual reporting date on which the trust fund balance
falls below the required reserve in accordance with subdivision (c)
and the deposits shall be in an amount sufficient to bring the trust
balance into compliance with this section.
   (g) Providers who have used a method previously allowed by statute
to satisfy their refund reserve requirement may continue to use that
method.
  SEC. 57.4.  Article 6.5 (commencing with Section 1792.11) is added
to Chapter 10 of Division 2 of the Health and Safety Code, to read:

      Article 6.5.  Actuarial Study

   1792.11.  The Legislature finds and declares all of the following:

   (a) In continuing care contracts, providers offer a wide variety
of living accommodations and care programs for an indefinite or
extended number of years in exchange for substantial payments by
residents over the term of the contract.
   (b) The annual reporting and reserve requirements for continuing
care providers should address a provider's long-term solvency.  The
past statutes establishing reserve requirements did not
satisfactorily address this issue.
   (c) One method for comprehensively assessing a continuing care
provider's long-term solvency, that may have significant potential
benefits for residents, providers, and the department, is an
actuarial study performed in compliance with Actuarial Standards of
Practice Number 3 as adopted by the Actuarial Standards Board.
   (d) The continuing care statutes should, during a test period
sufficient to apply the actuarial study requirement to all
appropriate providers, require those providers to obtain and file
with the department an actuarial study.
   (e) Fundamental to the effectiveness of actuarial studies are the
assumptions used to project costs and revenues, as well as the
breadth of the data base from which many of the assumptions are
derived.  For this and other reasons, neither the issues that will
arise during the department's management of the actuarial study
requirement nor the immediate impact of the actuarial study
requirement on the continuing care industry can be fully anticipated.

   (f) In the context of the foregoing, it is in the public's
interest that:
   (1) The statutes applicable to continuing care retirement
communities require all providers, with certain exceptions, to
conduct a one-time comprehensive assessment of their long-term
solvency and to report that assessment to the department.
   (2) The statutes applicable to continuing care retirement
communities implement a four-year trial program that requires
specified continuing care providers, and applicants for a certificate
of authority, to conduct an actuarial study.
   (3) The stability and longevity of the continuing care industry
not be threatened by the four-year test program or dissemination by
the department of any provider's actuarial study within four years of
the filing date for the actuarial study.
   (4) During a four-year trial period, the department, as well as
provider and resident representatives, assess the effectiveness of
using actuarial studies to analyze the long-term financial viability
of the providers in California.
   1792.12.  (a) The department shall implement in conformance with
this article a four-year trial program for examining, and reporting
on, the long-term solvency of specified continuing care providers.
   (b) Under the program, the department shall require providers to
obtain an actuarial study conducted in compliance with the Actuarial
Standards of Practice Number 3 and then to file their actuarial study
with the department.
   (c) It is the intent of the Legislature that the four-year trial
program shall do both of the following:
   (1) Allow the department to consider the effectiveness and role of
actuarial studies in the department's discharge of its obligation to
assess each provider's financial soundness.
   (2) Allow providers, the department, and resident representatives
to evaluate the actuarial study requirement, including the
reliability of actuarial studies and their value if statutorily
included in the regimen of continuing care providers' financial
reporting and disclosure obligations.
   (d) The department shall, during the four-year period following
the filing due date for a provider's actuarial study required under
this article, maintain the confidentiality of the actuarial study.
   (e) The department's responsibility to manage the four-year trial
program and review the providers' actuarial studies under this
article represents a significant burden on its resources dedicated to
its oversight of the continuing care industry.  The department is
specifically authorized to use third-party professional consultants
as necessary to properly discharge its responsibilities under this
article and to also allocate resources from the Continuing Care
Provider Fee Fund as necessary to retain within the department the
level of expertise required by the program.
   (f) During the four-year trial program, the
five-hundred-thousand-dollar ($500,000) ceiling on the projected
annual balance for the Continuing Care Provider Fee Fund specified in
Section 1778 shall be increased to seven hundred fifty thousand
dollars ($750,000).
   1792.13.  (a) During the four-year trial period, the department
shall continually assess the effectiveness of using actuarial studies
to analyze the long-term financial position of the providers in
California.
   (b) On January 1, 2003, the department shall form a nine-member
panel after consultation with the prominent residents' associations,
the prominent providers' associations, and the Continuing Care
Advisory Committee.  The department shall appoint to the panel three
resident representatives, three provider representatives, and three
representatives of the department.  The panel shall determine the
value of the actuarial study requirement in terms of all of the
following:
   (1) Its effectiveness as a method for assessing a provider's
long-term solvency.
   (2) Its usefulness to the department in the discharge of its
statutory oversight responsibilities regarding providers' financial
soundness.
   (3) Its usefulness to providers as a management tool.
   (4) Its effectiveness as a method for disclosing financial
information regarding providers to residents and potential residents
of continuing care facilities.
   (c) The expenses incurred by the panel's members shall be charged
to the Continuing Care Provider Fee Fund in the same manner and to
the same extent as the expenses incurred by the members of the
Continuing Care Advisory Committee are charged to the Continuing Care
Provider Fee Fund under this chapter.
   (d) The panel shall issue a report to the department before
February 13, 2004.  The report shall include the panel's findings and
any statutory changes it proposes to implement its findings.  The
report shall specifically address whether the actuarial study
requirement should continue as law, and if so, it shall also
reexamine how best to classify providers for purposes of the
actuarial study requirement and recommend the appropriate interval
between the actuarial studies required for each type of provider.  If
the panel advises against continuing the actuarial study
requirement, the panel:
   (1) May recommend an alternative process, or ratify existing
processes for evaluating and reporting a provider's long-term
solvency.
   (2) Shall reexamine the adequacy of the reserve requirements
stated in Article 6 (commencing with Section 1789) and make any
recommendations it deems appropriate.
   (3) Shall reexamine the disclosure obligations of providers in
regard to their long-term solvency and make any recommendations it
deems appropriate.
   (e) The department shall submit recommendations to the Legislature
as necessary to implement the recommendations of the panel through
the enactment of legislation that would be effective on or before
January 1, 2005.
   1792.14.  (a) For purposes of this article, "actuarial study"
means an analysis that addresses the current actuarial financial
condition of a provider that is performed by an actuary in accordance
with accepted actuarial principles and the standards of practice
adopted by the Actuarial Standards Board.  An actuarial study shall
include all of the following:
   (1) An actuarial report.
   (2) A statement of actuarial opinion.
   (3) An actuarial balance sheet.
   (4) A cohort pricing analysis.
   (5) A cash-flow projection.
   (6) A description of the actuarial methodology, formulae, and
assumptions.
   (b) "Actuary" means a member in good standing of the American
Academy of Actuaries who is qualified to sign a statement of
actuarial opinion.
   1792.15.  (a) An actuarial study, prepared or reviewed by an
actuary, shall be submitted to the department by every applicant
proposing a new continuing care retirement community except those
applicants that, as of January 1, 2001, have fully satisfied the
requirements of Section 1780 for issuance of a permit to accept
deposits related to the proposed project.  The actuarial study shall
demonstrate that the proposed continuing care retirement community's
financial position is in satisfactory actuarial balance and shall
include all of the following:
   (1) An actuarial balance sheet that demonstrates that, for a
hypothetical cohort of new residents at the proposed continuing care
retirement community, the sum of the entrance fees to be paid at
occupancy plus the actuarial present value at occupancy of those
residents' periodic fees equals the actuarial present value at
occupancy of the costs of performing all obligations to those
residents under their continuing care contracts, plus appropriate
provision for surplus.
   (2) Supporting detailed documentation for the actuarial balance
sheet, including all of the following:
   (A) A projection of future population flows, for the first 20
years, using appropriate mortality, morbidity, withdrawal, and other
demographic assumptions.
   (B) A projection of future health care needs and corresponding
costs by level of care, for the first 20 years, using appropriate
inflation factors, mortality, morbidity, withdrawal, and other
demographic assumptions.
   (C) A description of the actuarial data, assumptions, and methods
used to create the projections in the actuarial report.
   (3) A pricing analysis that demonstrates that, for a typical
cohort of replacement residents at the continuing care retirement
community, the sum of the entrance fees to be paid at occupancy plus
the actuarial present value at occupancy of periodic fees paid by the
residents equals the actuarial present value at occupancy of the
costs of performing all obligations to the residents under their
continuing care contracts, with appropriate provision for surplus.
   (4) Cash-flow statements that project positive cash balances for a
20-year period.
   (5) The opinion of the actuary that the data and assumptions used
are reasonable and appropriate, the methods employed are consistent
with sound actuarial principles and practices, and provision has been
made for all actuarial liabilities and related statement items.
   1792.16.  (a) Each provider shall submit an actuarial study to the
department during the years specified in Section 1792.18.
   (b) All actuarial studies shall be prepared or reviewed by an
actuary and shall include all of the following:
   (1) An actuarial balance sheet that demonstrates whether the
resources available for current residents, including the actuarial
present value of periodic fees to be paid by the residents, is
greater than or equal to the actuarial present value of the costs of
performing all remaining obligations to those residents under their
continuing care contracts, with appropriate provision for surplus.
   (2) Supporting detailed documentation for the actuarial balance
sheet, including all of the following:
   (A) A projection of future population flows, for the next 20
years, using appropriate mortality, morbidity, withdrawal, and other
demographic assumptions.
   (B) A projection of future health care needs and corresponding
costs, for the next 20 years, using appropriate inflation factors,
mortality, morbidity, withdrawal, and other demographic assumptions.

   (C) A description of the actuarial data, assumptions, and methods
used to create the projections in the actuarial study.
   (3) A pricing analysis that demonstrates whether, for a typical
cohort of replacement residents at the continuing care retirement
community, the sum of the entrance fees to be paid at occupancy plus
the actuarial present value at occupancy of periodic fees paid by the
residents equals the actuarial present value at occupancy of the
costs of performing all remaining obligations to the residents under
their continuing care contracts, with appropriate provision for
surplus.
   (4) Cash-flow statements that project cash balances with respect
to current and future residents for a period of at least 20 years.
   (5) The opinion of the actuary that the data and assumptions used
are appropriate, the methods employed are consistent with sound
actuarial principles and practices, and whether provision has been
made for all actuarial liabilities and related statement items.
   1792.17.  (a) For purposes of this section, the term "health care
guarantee" means the degree to which the fees charged by a provider
in a continuing care contract for health care, including assisted
living services and skilled nursing care, are less than the fees
charged by the provider on a per diem basis to noncontinuing care
residents.  The three types of health care guarantees are extensive,
limited, and nominal and are described as follows:
   (1) An extensive health care guarantee exists in all life care
contracts and prepaid contracts as well as all other continuing care
contracts where a resident either:
   (A) Pays the same or nearly the same monthly fee for health care,
including temporary or permanent assisted living services or skilled
nursing care, as the resident was charged while residing in an
independent living unit.
   (B) Pays a rate for health care, including temporary or permanent
assisted living or skilled nursing care, that, regardless of the
duration of his or her health care needs, is 80 percent or less of
the per diem rate charged to noncontinuing care contract residents.
   (2) A limited health care guarantee exists in all continuing care
contracts where the health care guarantee is not extensive or
nominal.
   (3) A nominal health care guarantee exists in all continuing care
contracts where the resident is charged less than the per diem rate
charged to noncontinuing care residents for health care for five or
fewer days in any 12-month period and otherwise pays on a per diem
basis for all levels of health care.
   (b) The department shall classify each provider as a Type I
Provider, a Type II Provider, or a Type III Provider based on the
following:
   (1) A Type I Provider is a provider that has entered into a
continuing care contract that includes an extensive health care
guarantee.
   (2) A Type II Provider is a provider to which both of the
following apply:
   (A) Has entered into a continuing care contract that includes a
limited health care guarantee.
   (B) Has not entered into any continuing care contract that
includes an extensive health care guarantee.
   (3) A Type III Provider is a provider that satisfies either of the
following:
   (A) It has only entered into continuing care contracts that
include nominal health care guarantees.
   (B) It does not charge entrance fees or monthly service fees, such
as those providers who accept an assignment of assets and fund the
costs of providing care with charitable contributions.
   1792.18.  (a) A provider shall file its actuarial study within 45
days after the due date for its annual report.  Each provider that
operates more than one continuing care retirement community shall
prepare one actuarial study encompassing all its communities and
shall be assigned a single date for filing its actuarial study.  All
providers shall file actuarial studies with the department during the
years specified as follows:
   (1) Each provider classified as a Type I Provider shall file an
initial actuarial study following its annual report filed during the
2001 calendar year.  A Type I Provider that has completed an
actuarial study satisfying the requirements of this article during
the 2000 calendar year may file that actuarial study with the
department in order to satisfy the provider's obligation under this
section.
   (2) Each provider classified as a Type II Provider shall file an
initial actuarial study according to the following schedule:
   (A) Six of the providers holding certificates of authority on
January 1, 2001, or a lesser number, at the department's discretion,
shall file their actuarial studies following their annual report
filed during the 2001 calendar year.
   (B) One-half of the remaining number of providers holding
certificates of authority on January 1, 2001, shall file their
actuarial studies following their annual reports filed during the
2002 calendar year.
   (C) The remaining providers holding certificates of authority on
January 1, 2001, shall file their actuarial studies following their
annual reports filed during the 2003 calendar year.
   (3) A provider classified as a Type III Provider  shall not be
obligated by this article to file an actuarial study.
   (b) As soon as practicable following January 1, 2001, the
Continuing Care Advisory Committee shall select randomly those Type
II Providers that will be required to file their actuarial studies
following their annual reports filed during the 2001, 2002, and 2003
calendar years.  A Type II Provider that has completed an actuarial
study satisfying the requirements of this article during the 2000
calendar year may request that the department both designate the
provider as one of the providers that is required to file an
actuarial study in the 2001 calendar year and that the provider's
2000 calendar year actuarial study be accepted by the department in
satisfaction of the provider's obligation to file an actuarial study
in the 2001 calendar year.  A provider shall submit to the department
a copy of its 2000 calendar year actuarial study with its request.
   (c) Applicants that have applications pending as of January 1,
2001, shall file an actuarial study as follows:
   (1) Applicants that submitted an actuarial study with their
application shall file their initial actuarial study as a provider
during the year they file their first annual report after the
earliest of the following occurs:
   (A) The new continuing care retirement community reaches
85-percent occupancy.
   (B) Thirty months following the issuance of a preliminary
certificate of authority for the new continuing care retirement
community.
   (2) All other applicants shall file their initial actuarial study
during the year they file their first annual report.
   (d) A provider shall pay a one-thousand-dollar ($1,000) late fee
if it fails to file its actuarial study on or before the date it is
due.  A provider shall pay an additional late fee of thirty-three
dollars ($33) per day for each day after the first 30 days that the
actuarial study is late.  All late fees due shall accompany the
actuarial study when it is filed or late fees shall continue to
accrue until paid.  The late fees described in this subdivision are
separate from, and accrue independently of, any other late fees that
may apply if a provider fails to file its annual report when due.
The department may, at its discretion, waive this late fee upon a
showing of good cause by the provider.
   1792.19.  (a) Each actuarial study required of a provider by
Section 1792.16 shall demonstrate that the provider's financial
condition is in satisfactory actuarial balance, including an
appropriate surplus, such that the provider has the financial
resources to meet all its actuarial liabilities.  A provider's
financial condition is in satisfactory actuarial balance if its
actuarial study includes all of the following:
   (1) An actuarial balance sheet that demonstrates the resources
available for current residents at the continuing care retirement
community, including the actuarial present value of periodic fees to
be paid by the residents, at least equals the actuarial present value
of the costs of performing all remaining obligations to those
residents under their continuing care contracts, with appropriate
provision for surplus.
   (2) A pricing analysis that demonstrates, for a typical cohort of
replacement residents at the continuing care retirement community,
the sum of the entrance fees to be paid at occupancy plus the
actuarial present value at occupancy of periodic fees paid by the
residents equals the actuarial present value at occupancy of the
costs of performing all remaining obligations to the residents under
their continuing care contracts, with appropriate provision for
surplus.
   (3) Cash-flow statements that project positive cash balances with
respect to current and future residents for a period of at least 20
years.
   (4) The opinion of the actuary that provision has been made for
all actuarial liabilities and related statement items.
   (b) In the event that an actuarial study shows insufficient
financial resources to meet all its actuarial liabilities or an
actuarial balance sheet deficit, the actuarial report shall clearly
state the implications of the provider's financial condition.  The
report shall specifically describe management's plans for improving
its financial position to achieve an actuarial balance including an
appropriate surplus.  In addition, the provider shall submit with its
actuarial study a detailed narrative addressing its actuarial
deficiency and describing its plan to achieve actuarial balance.
   1792.20.  (a) Each provider that has submitted an actuarial study
to the department shall, after the close of each fiscal year, review
and compare its actual results from operations during the closed year
to the assumptions made in its actuarial study for that year in a
form prescribed by the department.
   (b) Providers are not required to file the statement described in
subdivision (a) in any year that they file an actuarial report.
   1792.21.  Any unpaid fines accruing or assessed under the
provisions of this article as of January 1, 2005, when this article
is repealed pursuant to Section 1792.22 shall remain payable and
continue to accrue in the same manner as provided in this article.
   1792.22.  This article shall remain in effect only until January
1, 2005, and as of that date is repealed.
  SEC. 58.  Section 1793.5 of the Health and Safety Code is amended
to read:
   1793.5.  (a) An entity that accepts deposits and proposes to
promise to provide care without having a current and valid permit to
accept deposits is guilty of a misdemeanor.
   (b) An entity that accepts deposits and fails to place any deposit
received into an escrow account as required by this chapter is
guilty of a misdemeanor.
   (c) An entity that executes a continuing care contract without
holding a current and valid provisional certificate of authority or
certificate of authority is guilty of a misdemeanor.
   (d) An entity that abandons a continuing care retirement community
or its obligations under a continuing care contract is guilty of a
misdemeanor.  An entity that violates this section shall be liable to
the injured resident for treble the amount of damages assessed in
any civil action brought by or on behalf of the resident in any court
having proper jurisdiction.  The court may, in its discretion, award
all costs and attorney fees to the injured resident, if that
resident prevails in                                           the
action.
   (e) Each violation of subdivision (a), (b), (c), or (d) is subject
to a fine not to exceed ten thousand dollars ($10,000), or by
imprisonment in the county jail for a period not to exceed one year,
or by both.
   (f) An entity that issues, delivers, or publishes, or as manager
or officer or in any other administrative capacity, assists in the
issuance, delivery, or publication of any printed matter, oral
representation, or advertising material which does not comply with
the requirements of this chapter is guilty of a misdemeanor.
   (g) A violation of subdivision (f) by an entity will constitute
cause for the suspension of all and any licenses, permits,
provisional certificates of authority, and certificates of authority
issued to that entity by any agency of the state.
   (h) A violation under this section is an act of unfair competition
as defined in Section 17200 of the Business and Professions Code.
  SEC. 59.  Section 1793.6 of the Health and Safety Code is amended
to read:
   1793.6.  (a) The department may issue citations pursuant to this
section containing orders of abatement and assessing civil penalties
against any entity that violates Section 1771.2 or 1793.5.
   (b) If upon inspection or investigation, the department has
probable cause to believe that an entity is violating Section 1771.2
or 1793.5, the department may issue a citation to that entity.  Each
citation shall be in writing and shall describe with particularity
the basis of the citation.  Each citation shall contain an order of
abatement.  In addition to the administrative fines imposed pursuant
to Section 1793.27, an entity that violates the abatement order shall
be liable for a civil penalty in the amount of two hundred dollars
($200) per day for violation of the abatement order.
   (c) The civil penalty authorized in subdivision (b) shall be
imposed if a continuing care retirement community is operated without
a provisional certificate of authority or certificate of authority
and the operator refuses to seek a certificate of authority or the
operator seeks a certificate of authority and the application is
denied and the operator continues to operate the continuing care
retirement community without a provisional certificate of authority
or certificate of authority, unless other remedies available to the
department, including prosecution, are deemed more appropriate by the
department.
   (d) Service of a citation issued under this section may be made by
certified mail at the last known business address or residence
address of the entity cited.
   (e) Within 15 days after service of a citation under this section,
an entity may appeal in writing to the department with respect to
the violations alleged, the scope of the order of abatement, or the
amount of civil penalty assessed.
   (f) If the entity cited fails without good cause to appeal in
writing to the department within 15 business days after service of
the citation, the citation shall become a final order of the
department.  The department may extend the 15-day period for good
cause, to a maximum of 15 additional days.
   (g) If the entity cited under this section makes a timely appeal
of the citation, the department shall provide an opportunity for a
hearing.  The department shall thereafter issue a decision, based on
findings of fact, affirming, modifying, or vacating the citation or
directing other appropriate relief.  The proceedings under this
section shall be conducted in accordance with the provisions of
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, and the department shall have all the
powers granted therein.
   (h) After exhaustion of the review procedures specified in this
section, the department may apply to the appropriate superior court
for a judgment in the amount of the civil penalty and an order
compelling the cited entity to comply with the order of abatement.
The application, which shall include a certified copy of the final
order of the department shall be served upon the cited entity who
shall have five business days to file that entity's response in
writing in the superior court.  This period may be extended for good
cause.  Failure on the part of the cited entity to respond shall
constitute grounds for entry of a default judgment against that
entity.  In the event a response is timely filed in superior court,
the action shall have priority for trial over all other civil
matters.
   (i) Notwithstanding any other provision of law, the department may
waive part or all of the civil penalty if the entity against whom
the civil penalty is assessed satisfactorily completes all the
requirements for, and is issued, a provisional certificate of
authority or certificate of authority.
   (j) Civil penalties recovered pursuant to this section shall be
deposited into the Continuing Care Provider Fee Fund.
  SEC. 60.  Section 1793.7 of the Health and Safety Code is amended
to read:
   1793.7.  A permit to accept deposits, a provisional certificate of
authority, or a certificate of authority shall be forfeited by
operation of law when any one of the following occurs:
   (a) The applicant terminates marketing for the proposed continuing
care retirement community.
   (b) The applicant or provider surrenders to the department its
residential care facility for the elderly license, the permit to
accept deposits, provisional certificate of authority, or certificate
of authority for a continuing care retirement community.
   (c) The applicant or provider sells or otherwise transfers all or
part of the continuing care retirement community.
   (d) A change occurs in the majority ownership of the continuing
care retirement community or the certificate of authority holder.
   (e) The applicant or provider merges with another entity.
   (f) The applicant or entity makes a material change in a pending
application which requires a new application pursuant to subdivision
(c) of Section 1779.8.
   (g) The applicant or provider moves the continuing care retirement
community from one location to another without the department's
prior approval.
   (h) The applicant or provider abandons the continuing care
retirement community or its obligations under the continuing care
contracts.
   (i) The applicant or provider is evicted from the continuing care
retirement community premises.
  SEC. 61.  Section 1793.8 of the Health and Safety Code is amended
to read:
   1793.8.  A Certificate of Authority shall be automatically
inactivated when a provider voluntarily ceases to enter into
continuing care contracts with new residents.  The provider shall
notify the department of its intention to cease entering into
continuing care contracts and shall continue to comply with all
provisions of this chapter until all continuing care contract
obligations have been fulfilled.
  SEC. 62.  Section 1793.9 of the Health and Safety Code is amended
to read:
   1793.9.  (a) In the event of liquidation, all claims made against
a provider based on the provider's continuing care contract
obligations shall be preferred claims against all assets owned by the
provider.  However, these preferred claims shall be subject to any
perfected claims secured by the provider's assets.
   (b) If the provider is liquidated, residents who have executed a
refundable continuing care contract shall have a preferred claim to
liquid assets held in the refund reserve pursuant to Section 1792.6.
  This preferred claim shall be superior to all other claims from
residents without refundable contracts or other creditors.  If this
fund and any other available assets are not sufficient to fulfill the
refund obligations, each resident shall be distributed a
proportionate amount of the refund reserve funds determined by
dividing the amount of each resident's refund due by the total
refunds due and multiplying that percentage by the total funds
available.
   (c) For purposes of computing the reserve required pursuant to
Sections 1792.2 and 1793, the liens required under Section 1793.15
are not required to be deducted from the value of real or personal
property.
  SEC. 63.  Section 1793.11 of the Health and Safety Code is amended
to read:
   1793.11.  (a) Any transfer of money or property, pursuant to a
continuing care contract found by the department to be executed in
violation of this chapter, is voidable at the option of the resident
or transferor for a period of 90 days from the execution of the
transfer.
   (b) Any deed or other instrument of conveyance shall contain a
recital that the transaction is made pursuant to rescission by the
resident or transferor within 90 days from the date of first
occupancy.
   (c) No action may be brought for the reasonable value of any
services rendered between the date of transfer and the date the
resident disaffirms the continuing care contract.
   (d) With respect to real property, the right of disaffirmance or
rescission is conclusively presumed to have terminated if a notice of
intent to rescind is not recorded with the county recorder of the
county in which the real property is located within 90 days from the
date of first occupancy of the residential living unit.
   (e) A transfer of money or property, real or personal, to anyone
pursuant to a continuing care contract that was not approved by the
department is voidable at the option of the department or transferor
or his or her assigns or agents.
   (f) A transaction determined by the department to be in violation
of this chapter is voidable at the option of the resident or his or
her assignees or agents.
  SEC. 64.  Section 1793.13 of the Health and Safety Code is amended
to read:
   1793.13.  (a) The department may require a provider to submit a
financial plan, if either of the following applies:
   (1) A provider fails to file a complete annual report as required
by Section 1790.
   (2) The department has reason to believe that the provider is
insolvent, is in imminent danger of becoming insolvent, is in a
financially unsound or unsafe condition, or that its condition is
such that it may otherwise be unable to fully perform its obligations
pursuant to continuing care contracts.
   (b) A provider shall submit its financial plan to the department
within 60 days following the date of the department's request.  The
financial plan shall explain how and when the provider will rectify
the problems and deficiencies identified by the department.
   (c) The department shall approve or disapprove the plan within 30
days of its receipt.
   (d) If the plan is approved, the provider shall immediately
implement the plan.
   (e) If the plan is disapproved, or if it is determined that the
plan is not being fully implemented, the department may, after
consultation with and upon consideration of the recommendations of
the Continuing Care Advisory Committee, consult with its financial
consultants to develop a corrective action plan at the provider's
expense, or require the provider to obtain new or additional
management capability approved by the department to solve its
difficulties.  A reasonable period, as determined by the department,
shall be allowed for the reorganized management to develop a plan
which, subject to the approval of the department and after review by
the committee, will reasonably assure that the provider will meet its
responsibilities under the law.
  SEC. 65.  Section 1793.15 of the Health and Safety Code is amended
to read:
   1793.15.  (a) When necessary to secure an applicant's or a
provider's performance of its obligations to depositors or residents,
the department may record a notice or notices of lien on behalf of
the depositors or residents.  From the date of recording, the lien
shall attach to all real property owned or acquired by the provider
during the pendency of the lien, provided the property is not exempt
from the execution of a lien and is located within the county in
which the lien is recorded.  The lien shall have the force, effect,
and priority of a judgment lien.
   (b) The department may record a lien on any real property owned by
the provider if the provider's annual report indicates the provider
has an unfunded statutory or refund requirement.  A lien filed
pursuant to this section shall have the effect, force, and priority
of a judgment lien filed against the property.
   (c) The department shall file a release of the lien if the
department determines that the lien is no longer necessary to secure
the applicant's or provider's performance of its obligations to the
depositors or residents.
   (d) Within 10 days following the department's denial of a request
for a release of the lien, the applicant or provider may file an
appeal with the department.
   (e) The department's final decision shall be subject to court
review pursuant to Section 1094.5 of the Code of Civil Procedure,
upon petition of the applicant or provider filed within 30 days of
service of the decision.
  SEC. 66.  Section 1793.17 of the Health and Safety Code is amended
to read:
   1793.17.  (a) When necessary to secure the interests of depositors
or residents, the department may require that the applicant or
provider reestablish an escrow account, return previously released
moneys to escrow, and escrow all future entrance fee payments.
   (b) The department may release funds from escrow as it deems
appropriate or terminate the escrow requirement when it determines
that the escrow is no longer necessary to secure the performance of
all obligations of the applicant or provider to depositors or
residents.
  SEC. 67.  Section 1793.19 of the Health and Safety Code is amended
to read:
   1793.19.  The civil, criminal, and administrative remedies
available to the department pursuant to this article are not
exclusive and may be sought and employed by the department, in any
combination to enforce this chapter.
  SEC. 68.  Section 1793.21 of the Health and Safety Code is amended
to read:
   1793.21.  The department, in its discretion, may condition,
suspend, or revoke any permit to accept deposits, provisional
certificate of authority, or certificate of authority issued under
this chapter if it finds that the applicant or provider has done any
of the following:
   (a) Violated this chapter or the rules and regulations adopted
under this chapter.
   (b) Aided, abetted, or permitted the violation of this chapter or
the rules and regulations adopted under this chapter.
   (c) Had a license suspended or revoked pursuant to the licensing
provisions of Chapter 2 (commencing with Section 1250) or Chapter 3.2
(commencing with Section 1569).
   (d) Made a material misstatement, misrepresentation, or fraud in
obtaining the permit to accept deposits, provisional certificate of
authority, or certificate of authority.
   (e) Demonstrated a lack of fitness or trustworthiness.
   (f) Engaged in any fraudulent or dishonest practices of management
in the conduct of business.
   (g) Misappropriated, converted, or withheld moneys.
   (h) After request by the department for an examination, access to
records, or information, refused to be examined or to produce its
accounts, records, and files for examination, or refused to give
information with respect to its affairs, or refused to perform any
other legal obligations related to an examination.
   (i) Manifested an unsound financial condition.
   (j) Used methods and practices in the conduct of business so as to
render further transactions by the provider or applicant hazardous
or injurious to the public.
   (k) Failed to maintain at least the minimum statutory reserves
required by Section 1792.2.
   (l) Failed to maintain the reserve fund escrow account for prepaid
continuing care contracts required by Section 1792.
   (m) Failed to comply with the refund reserve requirements stated
in Section 1793.
   (n) Failed to comply with the requirements of this chapter for
maintaining escrow accounts for funds.
   (o) Failed to file the annual report described in Section 1790.
   (p) Violated a condition on its permit to accept deposits,
provisional certificate of authority, or certificate of authority.
   (q) Failed to comply with its approved financial and marketing
plan or to secure approval of a modified plan.
   (r) Materially changed or deviated from an approved plan of
operation without the prior consent of the department.
   (s) Failed to fulfill his or her obligations under continuing care
contracts.
   (t) Made material misrepresentations to depositors, prospective
residents, or residents of a continuing care retirement community.
   (u) Failed to submit proposed changes to continuing care contracts
prior to use, or using a continuing care contract that has not been
previously approved by the department.
   (v) Failed to diligently submit materials requested by the
department or required by the statute.
  SEC. 69.  Section 1793.23 of the Health and Safety Code is amended
to read:
   1793.23.  (a) The department shall consult with and consider the
recommendations of the Continuing Care Advisory Committee prior to
conditioning, suspending, or revoking any permit to accept deposits,
provisional certificate of authority, or certificate of authority.
   (b) The provider shall have a right of appeal to the department.
The proceedings shall be conducted in accordance with Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, and the department shall have all of the powers
granted therein.  A suspension, condition, or revocation shall
remain in effect until completion of the proceedings in favor of the
provider.  In all proceedings conducted in accordance with this
section, the standard of proof to be applied shall be by a
preponderance of the evidence.
   (c) The department may, upon finding of changed circumstances,
remove a suspension or condition.
  SEC. 70.  Section 1793.25 of the Health and Safety Code is amended
to read:
   1793.25.  (a) During the period that the revocation or suspension
action is pending against the permit to accept deposits, provisional
certificate of authority, or certificate of authority, the provider
shall not enter into any new deposit agreements or continuing care
contracts.
   (b) The suspension or revocation by the department, or voluntary
return of the provisional certificate of authority or certificate of
authority by the provider, shall not release the provider from
obligations assumed at the time the continuing care contracts were
executed.
  SEC. 71.  Section 1793.27 of the Health and Safety Code is amended
to read:
   1793.27.  (a) If the department finds that any entity has violated
Section 1793.5 or one or more grounds exist for conditioning,
revoking, or suspending a permit to accept deposits, provisional
certificate of authority, or a certificate of authority issued under
this chapter, the department, in lieu of the condition, revocation,
or suspension, may impose an administrative fine upon an applicant or
provider in an amount not to exceed one thousand dollars ($1,000)
per violation.
   (b) The administrative fine shall be deposited in the Continuing
Care Provider Fee Fund and shall be disbursed for the specific
purposes of offsetting the costs of investigation and litigation and
to compensate court-appointed administrators when continuing care
retirement community assets are insufficient.
  SEC. 72.  Section 1793.29 of the Health and Safety Code is amended
to read:
   1793.29.  In the case of any violation or threatened violation of
this chapter, the department may institute a proceeding or may
request the Attorney General to institute a proceeding to obtain
injunctive or other equitable relief in the superior court in and for
the county in which the violation has occurred or will occur, or in
which the principal place of business of the provider is located.
The proceeding under this section shall conform with the requirements
of Chapter 3 (commencing with Section 525) of Title 7 of Part 2 of
the Code of Civil Procedure, except that no undertaking shall be
required of the department in any action commenced under this
section, nor shall the department be required to allege facts
necessary to show lack of adequate remedy at law, or to show
irreparable loss or damage.
  SEC. 73.  Section 1793.50 of the Health and Safety Code is amended
to read:
   1793.50.  (a) The department, after consultation with the
Continuing Care Advisory Committee, may petition the superior court
for an order appointing a qualified administrator to operate a
continuing care retirement community, and thereby mitigate imminent
crisis situations where elderly residents could lose support services
or be moved without proper preparation, in any of the following
circumstances:
   (1) The provider is insolvent or in imminent danger of becoming
insolvent.
   (2) The provider is in a financially unsound or unsafe condition.

   (3) The provider has failed to establish or has substantially
depleted the reserves required by this chapter.
   (4) The provider has failed to submit a plan, as specified in
Section 1793.13, the department has not approved the plan submitted
by the provider, the provider has not fully implemented the plan, or
the plan has not been successful.
   (5) The provider is unable to fully perform its obligations
pursuant to continuing care contracts.
   (6) The residents are otherwise placed in serious jeopardy.
   (b) The administrator may only assume the operation of the
continuing care retirement community in order to accomplish one or
more of the following:  rehabilitate the provider to enable it fully
to perform its continuing care contract obligations; implement a plan
of reorganization acceptable to the department; facilitate the
transition where another provider assumes continuing care contract
obligations; or facilitate an orderly liquidation of the provider.
   (c) With each petition, the department shall include a request for
a temporary restraining order to prevent the provider from disposing
of or transferring assets pending the hearing on the petition.
   (d) The provider shall be served with a copy of the petition,
together with an order to appear and show cause why management and
possession of the provider's continuing care retirement community or
assets should not be vested in an administrator.
   (e) The order to show cause shall specify a hearing date, which
shall be not less than five nor more than 10 days following service
of the petition and order to show cause on the provider.
   (f) Petitions to appoint an administrator shall have precedence
over all matters, except criminal matters, in the court.
   (g) At the time of the hearing, the department shall advise the
provider and the court of the name of the proposed administrator.
   (h) If, at the conclusion of the hearing, including such oral
evidence as the court may consider, the court finds that any of the
circumstances specified in subdivision (a) exist, the court shall
issue an order appointing an administrator to take possession of the
property of the provider and to conduct the business thereof,
enjoining the provider from interfering with the administrator in the
conduct of the rehabilitation, and directing the administrator to
take steps toward removal of the causes and conditions which have
made rehabilitation necessary, as the court may direct.
   (i) The order shall include a provision directing the issuance of
a notice of the rehabilitation proceedings to the residents at the
continuing care retirement community and to other interested persons
as the court may direct.
   (j) The court may permit the provider to participate in the
continued operation of the continuing care retirement community
during the pendency of any appointments ordered pursuant to this
section and shall specify in the order the nature and scope of the
participation.
   (k) The court shall retain jurisdiction throughout the
rehabilitation proceeding and may issue further orders as it deems
necessary to accomplish the rehabilitation or orderly liquidation of
the continuing care retirement community in order to protect the
residents of the continuing care retirement community.
  SEC. 74.  Section 1793.56 of the Health and Safety Code is amended
to read:
   1793.56.  (a) The appointed administrator is entitled to
reasonable compensation.
   (b) The costs compensating the administrator may be charged
against the assets of the provider.  When the provider's assets and
assets from the continuing care retirement community are
insufficient, the department, in its discretion, may compensate the
administrator from the Continuing Care Provider Fee Fund.
   (c) Any individual appointed administrator, pursuant to Section
1793.50, shall be held harmless for any negligence in the performance
of his or her duties and the provider shall indemnify the
administrator for all costs of defending actions brought against him
or her in his or her capacity as administrator.
  SEC. 75.  Section 1793.58 of the Health and Safety Code is amended
to read:
   1793.58.  (a) The department, administrator, or any interested
person, upon due notice to the administrator, at any time, may apply
to the court for an order terminating the rehabilitation proceedings
and permitting the provider to resume possession of the provider's
property and the conduct of the provider's business.
   (b) The court shall not issue the order requested pursuant to
subdivision (a) unless, after a full hearing, the court has
determined that the purposes of the proceeding have been fully and
successfully accomplished and that the continuing care retirement
community can be returned to the provider's management without
further jeopardy to the residents of the continuing care retirement
community, creditors, owners of the continuing care retirement
community, and to the public.
   (c) Before issuing any order terminating the rehabilitation
proceeding the court shall consider a full report and accounting by
the administrator regarding the provider's affairs, including the
conduct of the provider's officers, employees, and business during
the rehabilitation and the provider's current financial condition.
   (d) Upon issuance of an order terminating the rehabilitation, the
department shall reinstate the provisional certificate of authority
or certificate of authority.  The department may condition, suspend,
or revoke the reinstated certificate only upon a change in the
conditions existing at the time of the order or upon the discovery of
facts which the department determines would have resulted in a
denial of the request for an order terminating the rehabilitation had
the court been aware of these facts.
                                                   SEC. 76.  Section
1793.60 of the Health and Safety Code is amended to read:
   1793.60.  (a) If at any time the department determines that
further efforts to rehabilitate the provider would not be in the best
interest of the residents or prospective residents, or would not be
economically feasible, the department may, with the approval of the
Continuing Care Advisory Committee, apply to the court for an order
of liquidation and dissolution or may apply for other appropriate
relief for dissolving the property and bringing to conclusion its
business affairs.
   (b) Upon issuance of an order directing the liquidation or
dissolution of the provider, the department shall revoke the provider'
s provisional certificate of authority or certificate of authority.

  SEC. 77.  Section 1793.62 of the Health and Safety Code is amended
to read:
   1793.62.  (a) The department, administrator, or any interested
person, upon due notice to the parties, may petition the court for an
order terminating the rehabilitation proceedings when the
rehabilitation efforts have not been successful, the continuing care
retirement community has been sold at foreclosure sale, the provider
has been declared bankrupt, or the provider has otherwise been shown
to be unable to perform its obligations under the continuing care
contracts.
   (b) The court shall not issue the order requested pursuant to
subdivision (a) unless all of the following have occurred:
   (1) There has been a full hearing and the court has determined
that the provider is unable to perform its contractual obligations.
   (2) The administrator has given the court a full and complete
report and financial accounting signed by the administrator as being
a full and complete report and accounting.
   (3) The court has determined that the residents of the continuing
care retirement community have been protected to the extent possible
and has made such orders in this regard as the court deems proper.
  SEC. 78.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
